50 years of VAT in UK

The Guardian

London, April 11:

Happy Birthday VAT (value added tax). To be strictly accurate, that should be joyeux anniversaire TVA. Fifty years ago on April 10, Maurice Laure introduced the French to the delights of “la taxe sur la valeur ajoutee”. Unluckily for the rest of us, 13 years later the French persuaded the European Union that TVA was such a good idea, everyone should have it. So, when Britain signed up for the European ideal, VAT came along as part of the package.

It has been with us ever since; by turns baffling, maddening and, for the UK treasury, highly lucrative. VAT now brings in some 63 billion sterling pounds , according to Terry Dockley, a VAT specialist at accountant James & Cowper. Over the years VAT has turned up its share of curiosities. Take pigeon racing. Is it a sport? Not according to the VAT commissioners. Why not? Because the physical activity is undertaken by the pigeons, not their owners. Or take the case of the laxative fruit cubes. When the maker protested that the cubes should be treated as food and zero-rated, the tribunal riposted that they were “neither bought nor sold as a form of nourishment, nor were they consumed for pleasure”. Brutal, but logical.

While no one would argue that French fries sandwiches should not be described as food, albeit hardly as part of a calorie-controlled diet, they are also hot food and therefore purchasers are liable to VAT. While Britain’s zero rating of some items has provided scope for differing interpretations, Dockley says the differences of approach between UK law and the European legal system, with Europe having the final say, creates its own tensions.

Though it could be argued that taxing people on the money they earn and then again when they spend it may be thought a trifle unfair, Dockley notes, “If you put everything on a consumption tax it would mean prices would go up and people would complain. If you put everything on income, equally people will complain.” But then there’s no VAT on complaints - is there?