§ Lord Pearson of Rannochasked Her Majesty's Government:
(a) What European legislation governs the liability of local government to value added tax, and (b) what is the approximate cost to the Exchequer of the exemption of local government to VAT.
§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)The European Sixth VAT Directive governs the common system of Value Added Tax, and Article 4.5 of the Directive makes specific reference to local government authorities. Refunds to local authorities in respect of tax on inputs relating to non-business activities amounted to some £3 billion in 1995.