§ Mr. SpearingTo ask the Chancellor of the Exchequer under which paragraphs of treaty articles and consequential directives obligations are placed on Her Majesty's Government to make VAT charges in respect of(a) building repairs, (b) items of safety equipment hitherto 7W exempt and (c) non-domestic building and civil engineering projects; in each case what communications he received from the Commission or the European Court in relation to these or similar obligations; and in what manner the purport of each communication was reported to Parliament.
§ Sir John CopeArticle 99 of the treaty of Rome—treaty establishing the European Economic Community —allows for the EC Council of Ministers to adopt provisions for the harmonisation of legislation concerning VAT and other indirect taxes. The sixth Council VAT directive (77/388/EEC), which was adopted in accordance with this article, provides the framework for the application of VAT in all EC member states, including the United Kingdom's zero rates.
The vires for the retention of the United Kingdom's zero rates of VAT are contained in article 28.2 of the EC sixth VAT directive, which refers to article 17, last indent of the EC second VAT directive (67/228/EEC). This states:
Such measures may only be taken for clearly defined social reasons and for the benefit of the final consumer".The European Commission began infraction proceedings against the United Kingdom in 1981 alleging that some of the United Kingdom's zero rates did not comply with these conditions. The European Court of Justice supported the Commission where the supplies were made to businesses, but rejected the Commission's argument where the supplies were made direct to individuals.
Item (a) Building repairs have never been subject to the zero rate, and their taxation was not affected by the result of this judgment.
For items (b) and (c) listed above the correspondence between the Commission/European Court of Justice and the United Kingdom on this matter is as follows:
19 October 1981:
the Commission informed the United Kingdom that its zero rates did not in its opinion conform to the provisions of the EC sixth VAT directive under the provisions of article 169 of the treaty of Rome;25 February 1982:
the United Kingdom defended its zero rates in a letter to the Commission;4 September 1984:
the Commission sent a reasoned opinion to the United Kingdom;2 December 1987:
the Advocate General's opinion was published on the case; and21 June 1988:
the Court issued its judgment.Pleadings in infraction proceedings are strictly confidential to the parties in dispute. This point was discussed by the then Secretary of State for Employment, Lord Young of Graffham, in response to a question from Lord Stoddart of Swindon in October 1986, Official Report, House of Lords, 16 October 1986, columns 910–13.
The content of the judgment itself was communicated to Parliament in a speech made by the then Economic Secretary to the Treasury, the right hon. Member for St. Albans (Mr. Lilley), on the date of the judgment, Official Report, 21 June 1988, columns 969–87.
§ Mr. SpearingTo ask the Chancellor of the Exchequer if he will list the guidance which has been given by the Commission of the European Community as to the degree to which current variation in the rate of VAT charged between its member states constitutes an obstruction to the8W establishment or functioning of the Common Market together with the findings of the European Court of Justice relating to interpretation of this part of the article.
§ Sir John CopeThe Commission has given no guidance, nor has the European Court of Justice issued any findings about the harmonisation of VAT rates with the Community with regard to the establishment or functioning of the Common Market.
§ Mr. SpearingTo ask the Chancellor of the Exchequer (1) if he will set out a table showing for each group of commodities for which VAT is, or can be, chargeable by member states of the European Community, the prevailing rates charged by each member state in respect of each group of commodities for a latest practicable date, with footnotes for main variations in the figure or figure range, shown together with a concise statement, with references, of the treaty and consequential directive obligations placed on the United Kingdom to vary, or refrain from varying, such VAT rates(a) until 31 December 1996 and (b) thereafter;
(2) if he will publish a table for each principal item of commodities for which VAT is charged by any member state of the European Community the amount of which would be raised at rates of (a) 8.5 and (b) 17 per cent.
§ Sir John CopeRates of VAT applied in member states of the European Community on a range of commodities are set out in a document produced by the Commission of the European Communities which has been placed in the House of Commons Library. The title of the document is "The Evolution of VAT Rates applicable in the Member States of the Community" and the document number is XXI/158/93-EN. It shows the position at 1 May 1993.
Article 99 of the treaty of Rome allows for the EC Council of Ministers to adopt provisions for the harmonisation of legislation concerning VAT and other indirect taxes. EC VAT rates are governed by the sixth VAT directive (77/388/EEC) as amended (91/680/EEC), and the VAT rates and structures directive (92/77/EEC). The directives set out the exemptions from VAT and the rates of VAT which are to apply to taxable goods and services in the EC from 1 January 1993.
For most goods and services a standard rate of at least 15 per cent. is to be applied. Member states may also apply one or two reduced rates of not less than 5 per cent. to a specified list of goods and services. The United Kingdom's right to maintain its existing zero rates is protected by the sixth VAT directive and reinforced by the more recent VAT rates directive, at least until 31 December 1996 and without prejudice to what happens thereafter. The United Kingdom may apply a reduced rate—or the standard rate—to any goods or services that are currently zero-rated. The rates directive makes no provision for higher—luxury—rates of VAT.
The scope and coverage of the reduced rate list will be reviewed before the end of 1994. The minimum VAT standard rate is legally binding until 31 December 1996. If by then the Council has not agreed a new minimum rate to apply from 1 January 1997, the minimum standard rate will lapse on that date.
Table 9 of the tax ready reckoner and tax reliefs published by HM Treasury in July 1993 sets out the cost of applying a zero rather than a standard rate of VAT to the main zero rated items, in 1993–94. These figures can be adjusted pro rata to arrive at a rough estimate of the 9W revenue yield from applying a rate of 8.5 per cent. A table showing figures for each principal item for which VAT is charged by any member state of the European Community is not available and could be produced only at disproportionate cost.