Indirect Taxes (Disclosure) (Hansard, 26 June 2002)

§ Mr. Mark Hoban (Fareham)

I beg to move, That leave be given to bring in a Bill to require retailers to include on receipts the amount of VAT and excise duties paid on goods and services purchased. I am not sure whether anyone knows how much tax they pay. Those in work will know how much national insurance and pay-as-you-earn they pay from their payslips and P60s, and those who are subject to self-assessment will get a summary of their income and the tax that they have paid on it, but direct taxes are only part of the picture. With very few exceptions, almost every one of us will pay indirect taxes in the form of excise duties, fuel duties and VAT on the goods and services that we buy. Occasionally, we will get a VAT receipt or bill that sets out the net amount, the VAT charged and the gross amount; hotel bills, telephone bills and invoices from tradesmen usually fall into that category. However, we are rarely told how much VAT we have paid, and even more rarely will we know how much we have paid in excise duties.

If the revenue raised were trivial, it would not matter too much how much we paid. It would be of no consequence to us, as a few pence here and there would not make much difference. However, the amount that we pay through such taxes is not trivial. This year's Red Book shows that the outturn for indirect taxes for 2001—02 is as follows: VAT, £61.1 billion; fuel duties, £21.9 billion; tobacco, £7.8 billion; spirits, £1.9 billion; wine, £2 billion; and beer and cider, £3 billion—a total of £97.8 billion. In comparison, the yield for income tax in the same year was £110.2 billion, so VAT and other indirect taxes raise almost as much as income tax. As I said, everyone knows how much income tax they pay, but how many people realise that they are paying almost as much through VAT and other indirect taxes?

The cost of VAT and other taxes soon mounts up. Let me give a few examples. An England fan watching the match last Friday and wearing a £30 England top would have paid £4.46 in VAT for the top. The tax on the four cans of beer that he might have drunk during the match—costing, say, £4—would be £1.20. If he decided, having heard the result, to drown his sorrows in a bottle of whisky costing £14, he would have to pay £8.50 in tax.

As another example, The Grocer, a retail trade magazine, has a standard shopping basket called "The Grocer 33". In the 15 June edition of the magazine, the cheapest shopping basket containing the 33 items featured was £38.67, of which £5.83 went to the Chancellor in a combination of VAT and excise duties. More than 15 per cent. of the amount paid at the till went straight to the Exchequer.

How many people know that a litre of petrol costing 74.6p includes duty of 46p and VAT of 11p? Refuelling a family car with a 40-litre tank will benefit the Chancellor to the tune of £22.80. At the time of the petrol tax protests a couple of years ago, people knew how much they were paying, but memories have faded. The Bill would ensure that every time people filled up they would know just how much they were paying the Chancellor in taxes.

As those examples show, VAT and other duties mount up quickly, but such taxes have another aspect that we need to consider. I believe that indirect taxes are a form 890 of stealth tax, because no one knows how much tax they are paying to the Treasury every time they make a payment. When a tax is taken by stealth, people cannot assess the true cost to them of the services that the Government provide. Of course, that is in the Government's interests—it is far better to raise taxes by stealth than take tough decisions on spending priorities. It is far better to extract the money in taxes from the purse or the wallet, where it is mixed up with the price of a bottle of wine or a litre of petrol, than to take it from the pay packet, where the tax paid is all too visible. It is far better to add the tax to the price of goods, so that retailers take the blame for price increases. We need to remove that opportunity for the Government to disguise the amount of tax that they raise from our spending.

If people do not know how much tax they pay, how can they judge whether they are getting value for money for the services that they receive? If their perception of the amount of tax that they pay is based solely on the amount that is taken from their pay packet, what reaction will they have when they realise that they are paying almost as much again through indirect taxes? Making sure that taxpayers know how much indirect tax they are paying in total would change the dynamic of the relationship between taxpayers and the Government. A greater awareness of the cost of services would lead to people giving much more thought to value for money. More people, whether their taxes are taken through their pay packets or through their spending, would question decisions on how money had been spent—the true cost of Government would become known. How much more dissatisfied would people become with failing public services when they realised that those services were costing them twice as much as they thought?

Another group of people—those who pay no income tax at all—would realise the extent of their contribution to the state. They would know how much tax they were paying towards Government services. Those on benefits would see how much of their income they have, in effect, paid for themselves through indirect taxes extracted through their weekly shopping and other spending. To use a biblical allusion, even the widow would see how much of her mite the Chancellor was taking.

In an ideal world, we would receive a statement setting out the taxes that we have paid—both direct and indirect—so that we could see at a glance the tax burden that each of us suffers personally. I readily accept that that is impractical, but vie can progress towards the goal of increasing the transparency of our personal tax burdens by requiring those who supply us with goods and services to give us receipts telling us how much tax we have paid on our shopping, whether it is for food, drink, electrical goods or petrol. Every time we bought something, we would know straight away how much of what we had paid the retailer or the publican would go to the Government. It would be a powerful jolt to each of us if we knew that most of the price of a bottle of wine was going to the Chancellor; perhaps we would stop and think about whether we were getting value for money. That is what they do in the United States. Every receipt shows the amount of sales tax that one has paid. Perhaps that is one reason why people in the US are much more conscious of the taxes that they pay and why taxes may be lower. People who know how much tax they have paid are more likely to hold the Government to account, so the pressure 891 to restrain spending growth and to ensure that each pound of tax is spent wisely is great. We should perhaps learn that lesson from the United States.

This is a simple measure that I hope and believe would change the political climate. Politicians would find it less tempting to increase indirect taxes rather than income tax because people would be able to see the increase every time they paid for their shopping. Realising the full extent of their tax bill, voters would challenge the Government on value for money. Everyone would be able to understand the price that they pay for the Government services that they receive and to decide whether they are getting value for money.

It is time to lift the lid on taxes so that we can have a proper debate about how much we pay and the value that we get. Ensuring that we know how much VAT and other indirect taxes we pay on goods would be the start of that process.