§ Mr. GryllsTo ask the Chancellor of the Exchequer if he will estimate the effect on tax revenues in 1992–93 and 1993–94, respectively, of the EC proposals for new systems for the collection of VAT, excise duties and customs duties after the abolition of controls at EC internal borders on 1 January 1993 giving separate figures for VAT, excise duties and customs duties; and if he will estimate the difference it would make to the VAT figures if the proposed new system for VAT on imports of goods and related services from other EC member states were extended also to such imports from non-EC countries.
§ Mrs. Gillian ShephardThe effects of the single market on tax revenues are difficult to predict because they depend on behavioural responses and the pattern and terms of trade.
The abolition of travellers' allowances for tax-paid goods from 1 January 1993 will reduce the yield from VAT and excise duties by about £15–40 million in 1992–93 and by about £100–300 million annually in subsequent years.
The introduction of postponed accounting for VAT on EC imports from 1 January 1993 will create a once-off cash flow loss to the Exchequer in 1992–93 of about £1½ billion because VAT will be collected later. There will be no effects in subsequent years.
To offset the revenue loss resulting from the introduction of postponed accounting, the Government have decided to introduce monthly VAT returns for the largest VAT payers in autumn 1992. This change is not a direct requirement of EC single market legislation. However it will produce an offsetting once-off cashflow gain to the Exchequer in 1992–93 of about £1½ billion because VAT will be collected earlier. Again, there will be no effects in subsequent years.
If postponed accounting were subsequently extended to non-EC imports there would be an additional once-off cashflow loss to the Exchequer of about £1 billion. There would be no effects in subsequent years.
As a consequence of the changes to the VAT technical system to operate in the single market, the VAT treatment of non-Community goods imported under inward processing relief (IPR) will change. VAT will no longer be chargeable at importation, but will be relieved while the goods remain under the IPR regime. As a result, in 1992–93 there will be a once and for all cash-flow loss to the revenue, estimated at some £40 million. However, that. figure may be lower depending on the number of IPR traders required to submit monthly returns.
The introduction, for those traders who will wish to put EC goods directly on to the market, of the system of registered excise dealers and shippers, may also lead to a small revenue loss in 1992–93. However, this will depend on the details of the accounting arrangements eventually 42W adopted and the numbers of traders wishing to use them. The revenue from customs duties will not be affected by the completion of the single market.