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Cut Flowers (Vat)

Volume 264: debated on Monday 23 October 1995

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To ask the Chancellor of the Exchequer, pursuant to his answer of 13 July, Official Report, columns 782–83, who has proposed a reduced rate of VAT on cut flowers; what are the arguments for this proposal; what is the proposed rate; what is the current rate; and how much revenue would be gained or lost by moving to a reduced rate. [38394]

[holding answer 20 October 1995]: The European Commission has proposed an Optional reduced rate for cut flowers in order to resolve a problem arising from cross-border trade.In 1992 those member states who applied a reduced rate to cut flowers were allowed to continue to do sc until the end of 1994. Because some of those member states were reluctant to move to their standard rate at the end of last year, the Commission suggested that an option to apply a reduced rate be made available to all member states.No specific rate has been proposed, although under existing rates provisions, it could not be less than 5 per cent. Currently most member states, including the United Kingdom, apply their standard rate. The rate applicable in the remaining member states is generally in the range of 5 to 8 per cent. If the rate of VAT in the UK were reduced to 5 per cent., the estimated revenue loss would be approximately £180 million in a full year. However, the Government have consistently made clear that they would not exercise the option to apply a reduced rate even it were made available.Adoption of the proposal requires the unanimous agreement of member states. Currently they remain divided, particularly because of concerns about cross-border distortions of competition and the revenue cost. The Government favour the application of the standard rate by all member states as the best way of addressing these concerns, and so do not support the proposal.