A Taxing Problem

David Cameron has called on the Government to allow small and medium-sized businesses to defer their VAT bills for up to six months due to the pressure they are coming under in the current banking credit crisis.

Despite the fact that our Westminster Labour Administration would not be particularly favourable to such a plan – at face value it sounds like a good idea, doesn’t it? Well sadly it’s not – and here’s why, as Dr Richard North kindly explains:

There are, however, just one or two tiny little problems with this idea. VAT is, of course, an EU tax, implemented via the VAT 6th Directive. A payment holiday on VAT would amount to a de facto reduction in the rate of tax, which is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.

That, though, might be the least of Mr Cameron’s tiny little problems. Member states are required under EU law to collect VAT, a proportion of which goes to the EU coffers – known as the ‘own resource’. Collection procedures are also defined by EU law, requiring the imposition of penalties on late payment – typically one percent per month. Changing these procedures unilaterally, guess what, is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.

Under certain circumstances, member states are entitled to adopt a simplified procedure for charging VAT, under Directive 2006/69/EC, but that does not include any provision for delaying tax payments. To the contrary, the Directive allows special provisions to enable member states to “prevent distortion of competition,” which rather shows where EU priorities lie.

If these hurdles were somehow to be overcome, however, unilateral action by the UK in offering a tax holiday would certainly be considered a ‘distortion of competition’ under Single Market rules. At the very least, Commission permission would have to be given, which will not necessarily be forthcoming.

And, since Mr Cameron’s proposals affect only small and medium-sized businesses, larger firms might be moved to complain. A company like McDonalds, for instance, would have a just complaint. It regards itself as a ‘group of small businesses’ under one banner. Fighting as it does for market share in competition with other high street outlets, it could argue that different rules on payment would most certainly distort competition.

There is also the matter of state aid. Broad-brush aid – which includes tax-breaks of any form, directed at one sector rather than applied uniformly – would most likely be considered illegal. At the very least, Commission approval would be required, which might not be forthcoming.

Then there is one other tiny little detail. Numerous studies – not least this one – have drawn attention to the danger of deferred VAT payments, making the system even more vulnerable to fraud. This is already a massive problem. Would Mr Cameron want to add to that problem?

David Cameron is calling for something which is practically unachievable. I’m just passing on this important message in case anyone is reading…

Quote Of The Month

The insults have been flying thick and fast on ConservativeHome in the past few days since its editor Tim Montgomerie attempted to take a recent Peter Hitchens Mail on Sunday column, which attacked the Conservative party, to task.

Well, unsurprisingly Tim’s efforts at actually rebutting Peter’s article were somewhat poor to say the least. Again unsurprisingly Mr Hitchens took the opportunity to reply to Tim’s criticisms – and he did so in stunning fashion.

It is worth reading both pieces and the comments in the section below each one. Take note of the fact that those that disagree with Peter generally do not argue against his points but just personally attack him and then dismiss him. Very telling I think.

Anyway, here is my favourite comment from Hitchens’ reply. It’s perhaps just as good as his previous statement that ‘you can’t be in Europe and not run by Europe any more than you can be in Wormwood Scrubs and not run by Wormwood Scrubs’:

In my view, the word ‘Eurosceptic’ means ‘a person who adopts anti-EU rhetoric in opposition, and then surrenders to the EU in government’. This is inevitable. You cannot be in the EU and not run by it, any more than you can be a little bit pregnant. If you don’t like being run by it, you must leave, as all serious students of the subject long ago realised. I don’t think there’s any serious dispute about which side of this fence Mr Cameron is on.

If Tim at ConservativeHome started to regularly post more critical articles (which ConHome’s sycophantic pages currently lack,) in a similar thoughtful vein to Peter’s piece then I might actually be tempted to started visiting and commenting on the site again. Just imagine it – reasoned, reasonable discussion rather than mindless wittering and blind allegiance.

Divide And Rule

News has finally and officially broken that the Deputy Editor of ConservativeHome, Samuel Coates has accepted a job in David Cameron’s office as part of his speechwriting team.

Some websites have been wishing Sam Coates well, and I suppose for me not to do so would seem somewhat mean-hearted considering what a golden political opportunity this is for him. So, very well done and congratulations to you Sam – best of luck in your new position.

I remember once meeting Sam outside the Highcliffe hotel on the cliffs of Bournemouth at the Conservative Party Conference in 2006. The poor boy was standing by the garden gate handing out some expensively produced 18 Vanity (Doughty) Street adverts to those leaving that day’s conference proceedings.

I spoke to him for about ten minutes or so and thought he seemed like a decent enough chap – but then most of the people in this party do until you really get to know them. I have also been pretty certain for some time now that Sam would eventually move on from ConservativeHome to pastures new because he had been in a position to build up a long list of contacts.

However, one does have to express more than a little scepticism at the decision by Cameron’s office to bring young Sam into the inner fold. Taking nothing away from Sam who is I’m sure a fine upstanding young man with all the qualities a speechwriter requires, the motivation behind this is actually, I think, a classic case of divide and rule by David Cameron – a tactic of which Tony Blair and the Labour party have in the past been very fond.

Click here to continue reading the article…

Conservative Thames Victory

The Conservative candidate, John Howell has comfortably won the by-election in Henley as originally predicted with a small swing to the Conservatives while the Labour vote collapsed.

However, the Liberal Democrats share of the vote did also increase slightly despite the fact that they spent more time playing the man rather than the ball in what was for them a typically ‘negative’ by-election campaign.

While overall turnout fell it would appear that the Conservative vote held up reasonably well especially when considering that this was not a high profile by-election in the eyes of the national media in the same way as Crewe and Nantwich.

Much hard work and effort was put into this campaign by MPs and party activists who, much like David Cameron this morning, will no doubt be very pleased by this result as it vindicated their ‘positive’ campaigning approach without revealing actual policies.

This may hint that the Conservative voting electorate are in some respects optimistic that David Cameron will be more conservative in Government than he is saying he will be in opposition.