Select Committee on European Communities Second Report


Letter from Lord Tordoff, Chairman of the Committee, to Dawn Primarolo MP, Paymaster General, HM Treasury

  At its meeting on 20 July 1999, Sub-Committee A considered this document, with the help of your Explanatory Memorandum of 22 June 1999. It noted that the date of expiration of the United Kingdom's derogation (allowing it to charge VAT at less than 5 per cent) had already passed. It supported the Government's implicit wish to maintain the status quo, and asked me to enquire what further action you intend to take, in view of the damaging effect which this uncertainty is likely to have on the market. We should also be glad to see a copy of the consultants' report, which you suggest does not support the Commission's conclusions. Meanwhile, we are holding this document under scrutiny.

23 July 1999

Letter from Dawn Primarolo MP, Paymaster General, HM Treasury,to Lord Tordoff, Chairman of the Committee

  Thank you for your letter of 23 July 1999, about your committee's consideration of the European Commission's report on the effects of VAT on the competitiveness of the Community art market.

  As you observed, it was not the Government's wish to increase the rate of VAT on art imports, and we lobbied hard for support for maintaining our special reduced rate. That, however, would have required unanimous agreement, and regrettably the support necessary to persuade the Commission to make a proposal for such change did not materialise.

  While I was considering our position I sought the best legal advice available to the Government. Ultimately I was compelled to conclude that there was no viable choice but to legislate for the increase in import VAT (2.5 per cent to 5 per cent). You will know by now that the necessary legislation was brought into the Finance Bill at Report stage, and came into effect on 28 July 1999.

  At the same time I announced a concession which extended the scope of the new 5 per cent reduced rate to a much wider range of art imports than before. Representatives of the UK art market have acknowledged the considerable effort the Government has made on their behalf, and welcomed that concession, anticipating that it should help them to maintain the UK's competitive position in the international art market.

  I trust that this resolves your enquiry, and I enclose as you requested a copy of the consultants' report (not printed).

24 January 2000

Letter from Lord Tordoff, Chairman of the Committee, to Dawn Primarolo MP, Paymaster General, HM Treasury

  Thank you for your letter of 24 January, replying to mine of 23 July 1999, and for the copy of the consultants' report which you enclosed. We continue to regret that the Government's view did not prevail in the Council, but we congratulate you on having been able to make the other changes you describe which will mitigate the effect on the London art market.

  We have been holding the document under scrutiny awaiting your letter, but we have now cleared it.

3 February 2000

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