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Value Added Tax

Volume 17: debated on Sunday 11 April 1982

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asked the Chancellor of the Exchequer what is his policy towards the level of value added tax chargeable on the profit margins on holidays organised by tour operators within the Common Market.

It is not the Government's policy that the amount of VAT chargeable on package holidays should be determined by the profit margins of tour operators.

The VAT treatment of supplies by travel agents and tour operators is due to be reviewed by the European Community Commission during the course of this year in accordance with the provisions of the European Community's sixth VAT directive. If any changes were proposed to the Council of Ministers as a result of this review they would be fully discussed with the trade bodies concerned. Any decision by the Council would have to be unanimous. No proposals have yet been made for any change.

Will my hon. Friend confirm that the Government will show the greatest possible opposition to this proposal, as millions of holidaymakers look to him to avoid this extra cost, which will come on top of currency surcharges, fuel surcharges, airport taxes and even security levies? Does he agree with holidaymakers that there is no need for a new tax when we already have so many old ones?

VAT at the rate prevailing in the country in which the holiday is taken is paid within the total cost of a package. To impose it upon profit margins as well would be an extra layer of tax. For that reason, the Government have retained their derogation from the directive and will have the opportunity to maintain that position for the future when negotiations resume.

Does the Minister expect the VAT liabilities of Laker Airways and its subsidiaries to be paid in full?