§ Mr. David ShawTo ask the Chancellor of the Exchequer what reports, of how many cases, he has received from Her Majesty's Customs and Excise of value shifting between insurance costs and travel costs resulting in a loss of tax revenue. [12354]
§ Mr. OppenheimCustoms and Excise officials inform me that it is a common practice for the travel industry to adopt a pricing structure that results in comparatively low margins on holidays and high margins on the accompanying travel insurance. Regardless of whether the prime motivation for this pricing arrangement is commercial of fiscal, a tax loss results.
§ Mr. ShawTo ask the Chancellor of the Exchequer what steps he proposes to take to ensure there is no discrimination on rates of tax between insurance products sold through insurance providers and agents and those sold through travel agents. [12353]
§ Mr. OppenheimThe higher rate of insurance premium tax will be applied only to sales of insurance by certain suppliers, including travel agents. Such tax treatment reflects the fact that this measure is designed to address the tax loss arising from the widespread practice in these sectors of inflating the price of value added tax exempt insurance when it is supplied in association with 235W vatable goods and services. This tax loss cannot arise when insurance is supplied in isolation by insurance companies and their agents.