VAT (Hansard, 4 November 1993)

10. Mr. Alan W. Williams
To ask the Chancellor of the Exchequer what was the percentage of total Government revenue raised by value added tax (a) in 1978–79 and (b) in 1992–93.

§ Sir John Cope
VAT accounted for 7.3 per cent. of general Government receipts in 1978–79 and 16.9 per cent. in 1992–93.

Mr. Williams
Will the Minister comment on figures that were quoted in the May 1993 issue of Economic Trends? Those figures showed that as household disposable income decreases the proportion paid in VAT increases and that although the top 10 per cent. of the population pay 6.1 per cent. of their net income in value added tax, the bottom 10 per cent. pay 11.5 per cent. of their income. Does not that mean that any increase in VAT will hit the poor twice as hard as it hits the rich?

§ Sir John Cope
No, it does not necessarily mean that. It depends how it is done and what is done. In any case, it is well known that the Government's policy has been to shift some of the weight of taxation from direct to indirect taxation, and the hon. Gentlemen has enabled me to demonstrate how we have been doing that.

§ Sir Michael Neubert
What estimate does my right hon. Friend make of the VAT that is lost as a result of builders operating legally, and in a significant number of cases illegally, under the VAT exempt ceilling and, worse, those in the black economy evading tax altogether? In view of the critical need to reduce the current deficit, what action will he take to recover that revenue and restore fair competition to the building industry?

§ Sir John Cope
There has always been some argument about where we should fix the bottom level of VAT for that purpose—the turnover level. Those immediately above it tend to argue that it should be increased; those who feel that it would not be increased sufficiently to include them would, on the whole, like it moved further down to ensure that the smallest firms and one-man businesses are 'within the net. We try to reach a balanced judgment between those two pressures to fix the bottom level of VAT so that there is not too much burden either on the Customs and Excise in collecting it or on industry in filling in the forms. However, at the same time, we collect as much VAT as possible.