VAT hits porn, spares corpses

When Britain adopts VAT on April 1, every member of the Common Market will share the same system of indirect taxation. But the aim is to harmonise VAT rates. Given the varying rates from member country to member country, and within each one, this will mean more than one rate throughout the Community. In France, books deemed pornographic by the authorities are taxed at the "luxury goods" rate of 33.3 per cent, but classical novels are taxed at 23 per cent, and school text books at a reduced 7.5 per cent. Whale fat used for cooking is taxed less heavily than whale fat that goes into cosmetics. In Belgium, there was an outcry when the Government, which introduced value-added tax (a year late) at the beginning of 1971, imposed VAT on blood. Blood has since been exempted. Moreover, a European Parliament members' question to the European Commission on the reported VAT on corpses in Luxembourg turned out to be a red herring.

Those EEC Governments which have been obliged to introduce VAT over the past few years - the Dutch, Belgians, and Italians - did not take long to discover two of its main disadvantages: VAT led to an administrative nightmare, and it meant additional inflationary pressures. In the Netherlands, prices rose by more than five per cent during the first three months after VAT was introduced in January, 1969. The Belgians soon equated VAT with the phrase "tout va augmenter" (everything will go up). A system of price controls and inspection did limit the impact on housewives to some extent. Indirect taxation, in nations where it is high, such as France, Italy and Belgium, is fall the more crucial for these countries' national treasures. These Governments admit that some post-VAT decline in tax income is inevitable.

The Belgian Exchequer estimated that it had lost £125 million by the end of its first year of VAT. The French - of all the EEC Administrations, the most familiar with VAT - found that the tax had short-changed the Government by about £1,000 millions. In Belgium the VAT rate on many services stands at 18 per cent. But supposing a television repairer comes round to fix your set in the evening. Keen to maintain his customer on his books, he may well bargain over the rate, and the tax authorities might never be told of his visit. A proposal to reduce VAT on food (now taxed at 6 per cent) was withdrawn from the Belgian Government's latest anti-inflationary package on the grounds that the Treasury simply could not afford it.

Under a determined campaign to reduce VAT fraud, Belgian garage owners will have to record, for the tax inspector's benefit, the registration of every car they service - if the job is worth more than one franc (about 1p) - the date of the work, and the total bill, split into labour costs and the prices of spare parts. It has also been decreed that the exact size and shape of restaurant bills must be uniform, the better to cope with the central administration of VAT. "Paper pollution," the café and garage owners call it: "an abusive intervention by the State."

European Commission officials admit that a multiplicity of VAT rates lead to social rigidity because of high rates on "luxury" items. The ideal would be a single rate as in Britain and Scandinavian countries, with the poor compensated by either increased security benefits or a negative income tax. However, the initial aim of the European Commission is a standard VAT rate of about 15 per cent, throughout the EEC, and a reduced rate, for food and other essentials, of about 8 per cent.