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The elephant in the floods

Posted by Richard Wednesday, April 23, 2008 ,

Much preening is going on in that esteemed and thoroughly worthy organisation, the Taxpayers Alliance, over its coup in The Daily Telegraph, now repeated on their website.

The Alliance claims that our provincial government made a profit of almost half a billion pounds from the floods that devastated parts of Britain last year, extracted from taxpayers’ wallets through VAT charged on home repairs.

The Treasury, it appears, made £ 525 million from work carried out to rebuild property damaged by the flooding in the summer while only contributing £86 million to a relief fund, giving it a "profit" of £ 439 million.

So far, so good, but the Taxpayers Alliance is now getting together with the Federation of Master Builders and other groups, has launched a coalition called "Cut the VAT" to get the tax streamlined down to five percent from its current 17.5 percent rate.

And why five percent, and not total abolition? Well, that might have something to do with the fact that VAT is an EU tax system and, under the VAT 6th Directive, that is the minimum rate that can be charged. But, of the EU, there is no mention.

Furthermore, as we might have observed before, in order to drop the current rate to five percent, Mr Brown must get the permission of the other 26 member states in the Union – something Mr Chirac found to his cost, as indeed did Mr Brown when in 1997 he promised to cut VAT on fuel.

In the EU arena, VAT cuts are extremely fraught, and to overcome resistance to cuts – even if he was minded to seek them - Brown would have to invest huge political capital, for which there would be a major price to pay.

More to the point, the 26 member states would have to be "softened up" before they would even begin to think of such a drastic change. No only do they themselves rely on tax revenue from housing repairs, many actually charge VAT on new-build, which is exempt in the UK – a source of resentment with some of the "colleagues".

So fraught is this issue that, when it came to the relatively uncontentious issue of reducing VAT on church repairs, Mr Brown – then in his role of chancellor – chose to opt for a refund scheme rather than beard the "colleagues" for a full-blown exemption.

The Taxpayers Alliance, therefore, is looking in the wrong direction, blaming the wrong government. Our provincial government, in soaking (again) the flood victims, is merely obeying the law set by our masters in Brussels.

The elephant in the floods lives!

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