§ Mr. Shersby
asked the Prime Minister what is Her Majesty's Government's policy towards zero rating for the purposes of value added tax in the context of the development of the internal market within the European Community; what initiatives Her Majesty's Government plan in this respect during the United Kingdom's Presidency of the Council of Ministers; and if she will make a statement.
§ The Prime Minister
The European Commission has put forward a number of proposals aimed at removing barriers to trade within the Community. One of the measures it has suggested is the "approximation" of indirect tax rates throughout the Community. Acceptance of this proposal would undoubtedly raise a whole range of political, economic, social and industrial problems, not just for the United Kingdom but for all member states. A major issue for the Government would he the future of the zero rate. But we do not believe that out zero rate is incompatible with the development of the internal market. We would therefore maintain that any tax measures which the Council considered were necessary for the completion of the internal market should permit the continuation of the zero rate.
The Economic and Finance Council, at its meeting on 16 June, concluded that it could not take decisions on questions concerning tax rates and rate structures until the Commission had provided further details, which Lord Cockfield has now promised for April 1987. In the meantime the Council agree to continue work under the United Kingdom Presidency on certain existing technical proposals affecting frontier formalities and the structure and mechanisms of value added tax and the main excise duties.