§ Mr. Martenasked the Chancellor of the Exchequer what is now the rate of car tax paid by the purchaser of a car; why is VAT payable on this tax: and if he will make a statement.
§ Mr. Robert SheldonThe rate of car tax is 10 per cent. of the wholesale value. VAT is payable on it because under the Finance Act 1972 VAT is levied on the full value of goods, including any car tax or excise duty payable. However, the fact that VAT is charged on car tax was, of course, taken into account when the rate of car tax was established in 1973. The combined incidence of the two taxes was, in fact, less than the incidence of purchase tax which they replaced.