§ Mr. Gordon PrenticeTo ask the Chancellor of the Exchequer what assessment he has made of the number of people who have taken out travel insurance from(a) an insurance broker and (b) a travel agent in the last month for which figures are available. [13658]
§ Mr. OppenheimCalculations of revenue changes resulting from the Budget proposal were derived from information on premiums published by the Association of British Insurers.
§ Mr. David ShawTo ask the Chancellor of the Exchequer, pursuant to his answer of 29 January,Official Report, columns 234–35, (1) concerning insurance, if he will state (a) the extent of the increase in margins resulting from inflating the price of VAT-exempt insurance supplied in association with vatable goods and services, and (b) the normal margins in (i) the retail and (ii) the tour operating part of the travel industry; and what evidence he has that margins on insurance provided by the travel industry have changed since the introduction of insurance tax, and that such change has resulted from tax avoidance; [14112]
(2) if he will publish the data which supports his statement that there is a widespread practice of inflating the price of VAT-exempt insurance supplied in association with vatable goods and services; and if he will list (a) the number of instances discovered of price inflating, (b) the number of companies involved in price inflating, (c) the average value of the inflation price compared with the non-inflated price for each company and (d) the inflated price as a proportion of the non-inflated price. [14114]
§ Mr. Oppenheim[holding answer 3 February 1997]: The practice of inflating the price of VAT-exempt insurance premiums is commonplace in certain industry sectors, including the travel industry, and cases are too numerous to list. A mark-up of 100 per cent. on travel insurance is regularly applied by tour operators and travel agents and mark-ups of this size have been reported in the travel press. The basic pricing structure of the industry—low margin on holiday, high margin on insurances—is not disputed by industry representatives. The result of this pricing policy is that a typical travel insurance policy for a two-week European holiday purchased from a travel agent or tour operators costs about £30. A similar policy can be purchased elsewhere for half that price. There has never been any suggestion that the margins on insurance products provided by the travel industry were materially changed by the introduction of insurance premium tax.
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§ Mr. HinchliffeTo ask the Chancellor of the Exchequer what external legal advice he took before introducing a differential rate of insurance premium tax; and with which external bodies he consulted on this matter. [11468]
§ Mr. Oppenheim[holding answer 22 January 1997]: Extensive consultations with industry took place prior to the Budget concerning measures to counter VAT avoidance by various sectors that were misusing the VAT exemption for insurance. However, as is usual with tax-raising Budget measures, no external consultation took place on the insurance premium tax rate changes before the Budget announcement. Since that announcement, Ministers and officials have had numerous meetings with representative bodies for those affected by these changes.
§ Mr. Alfred MorrisTo ask the Chancellor of the Exchequer what representations he has received about the advantages enjoyed by insurers, brokers and agents over independent travel agencies in respect of rates of insurance premium tax; and if he will make it his policy to impose a common rate of tax in the holiday insurance market. [13342]
§ Mr. Oppenheim[holding answer 4 February 1997]: I have received a number of representations about the proposal to apply a higher rate of insurance premium tax to travel insurance sold through travel agents. This is an important element of the proposed higher rate which will address, on a wider front, the current VAT loss caused by certain suppliers applying disproportionately high margins to VAT-exempt insurance when sold with vatable goods and services. Since this VAT loss cannot arise when insurance is sold in isolation by insurers or specialist insurance intermediaries, such sales have not been included within the scope of the higher rate.