Wednesday, 5 November 2008

Stealth Tax

We are all familiar with the concept of stealth taxes in the UK. Almost everything you buy these days has an element of taxation either hidden in the price (like petrol) or added on as an extra (like Insurance Premium tax). However most people are still unaware (or refuse to admit) that one of our biggest taxes, Value Added Tax, is not a UK tax at all but is imposed from Brussels.

Of coursed it’s not a level playing field, 18 of the 27 EU members to levy value-added tax (VAT) rates below the 15 percent standard level on a variety of labour-intensive local services (such as bicycle repairs and haircuts). These exemptions end in 2010 and a proposal to extend them is being blocked by Germany as they claim it makes no sense in terms of harmonising tax rates in Europe. France is keen for a deal as during the recent elections President Sarkozy campaigned on a promise to introduce reduced rates on restaurant meals, a move which requires backing from all EU states. Currently only 11 of the bloc's 27 states are currently allowed to levy reduced rates on restaurant meals. Some member states are sensing an opportunity to horse-trade and have dusted down longstanding requests. Portugal, for instance, would like reduced rates on tolls for domestic road bridges as so many people commute to work over bridges in Lisbon. Britain wants the construction of new monuments to qualify for reduced rates so maybe Gordon Brown is planning a major statue to himself in every town, which would be one way to re-start the building industry I suppose!

Of course Germany’s real objection is to do with the EU aim of harmonising tax rates in Europe. It is a long term objective of the EU to transfer to Brussels all powers to set taxes. This would reduce national parliaments to the level of regional assemblies and centralising control with the politburo of the EU, the unelected and unaccountable EU Commission.

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