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Volume 181: debated on Monday 19 November 1990

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To ask the Chancellor of theExchequer if he will make a statement setting out

(a) the changes in policy which would require to be made by Her Majesty's Government, (b) the restrictions on the freedom of action in tax decision making and (c) the impact on the tax levels and on the zero rate if the various proposals relating to indirect tax harmonisation and Community statistics were approved by the Council of Ministers.

(a) The policy implications of the European Commission proposals covering indirect tax harmonisation and intra-Community trade statistics are detailed in the explanatory memoranda submitted by HM Customs and Excise and the Central Statistical Office respectively. Copies of the memoranda are available in the Library of the House.

(b) The proposals would require approximation of both VAT and excise duties; this would of course constrain our fiscal decisions.

(c) The Commission's revised VAT approximation proposals suggest an unspecified minimum standard rate

and a reduced rate of 4 to 9 per cent; for excises there are various proposals according to product category, for minimum rates or rate bands to be applied from 1 January 1993, and target rates to be achieved thereafter. The proposed rates would have a significant impact on United Kingdom rate levels and revenue; details are again given in the explanatory memoranda.

With regard to zero rates, the Commission's revised thinking of May 1989 accepted that these could be retained under certain circumstances; although the present VAT technical proposals do not include an arrangement to carry forward the legal base for zero rates after 1992. We would not, of course, agree to any proposals which would restrict our ability to retain a zero rate.

The Government have always made it clear that they do not consider centrally determined tax approximation to be necessary for the completion of the single market or desirable for the differing economic circumstances of member states. As adoption of the Commission proposals would require the unanimous agreement of member states, the United Kingdom's position is safeguarded.