The Pasty Tax is no more! Last night the Government announced a u-turn that means we will no longer see the prospect of bureaucrats, armed with thermometers, visiting bakeries across the country checking on the temperatures of savoury products. Instead, as long the products are allowed to cool down naturally, and are not sold in packaging designed to keep them warm, they will remain exempt from VAT.
This is great news. Only in bureaucratic heaven would such a measure be welcomed.
The Government also announced a U-turn on the caravan tax - although it was just a partial one. I have commented about the devastating impact levying 20 per cent VAT would have on the caravan manufacturing industry, its supply chains, and holiday parks across the country. Although the Government has backed down, it still intends to levy VAT at 5% on static caravans.
If you remember, in the Budget, the Chancellor said introducing VAT on static caravans was rectifying an anomaly. During Prime Minister's Questions on 18 April, David Cameron said this in reply to a question from Andrew Percy, MP for Brigg and Goole:
Obviously, I have listened carefully to the points that my hon. Friend has made, and the Chancellor has met other Yorkshire MPs. Again, this is an issue about drawing the VAT boundaries fairly. I do not think that it is fair that VAT is payable on a mobile caravan, but not on a stationary one. No one is talking about putting VAT on park homes, which are people’s permanent homes. This is about a fair drawing of the boundaries to ensure that there is a fair approach in our country.
Many people buy static caravans to use as second homes. Those who do generally can't afford a cottage in the country or by the sea. By introducing 5% VAT on static caravans, the Government has proved this is a tax grab. Although 5% is infinitely preferable to 20%, and the industry is breathing a sigh of relief, the VAT net has been widened, and as we all know, taxes have a nasty habit of going up, rather than going down. There is nothing to stop the Government from increasing the rate it levies on static caravans.
One of the conclusions in the 2020 Tax Commission report published last week was 'tax reform without tax cuts is a political disaster'. Instead of tinkering around the edges, and potentially causing thousands of job losses, in the vain attempt to extract more cash out of the economy, the Chancellor should be looking at the 2020 Tax Commission report and thinking about implementing its recommendations.
We need a fair, open and transparent system of taxation. Introducing complications in the name of simplification does not work, as we have just witnessed. Not only does it not work economically, the public can see straight through it.