asked the Minister for Finance if he will estimate the revenue yield if foodstuffs were VAT rated at (i) 5 per cent and (ii) 10 per cent; if he will estimate the relief in income taxation which that extra revenue would make possible either in terms of a raising of the threshold at which the 35 per cent rate begins to apply or in some other terms which he may find more convenient.
Written Answers. - VAT Yields.
412.
The estimated full year gain from applying VAT at 5 per cent and 10 per cent to foodstuffs (which is taken to mean VAT zero-rated food and drink for human consumption, excluding oral medicines) is £100 million and £200 million, respectively.
There are a wide variety of ways in which such yields could be applied to improve the tax system. The following are two sets of possibilities:
(a) Cost £100 million (i.e. 5 per cent VAT on foodstuffs); increase the personal allowance by £200 (£400); increase the general exemption limits by £100 (£200); increase both age exemption limits by £200 (£400) or widen the 35 per cent rate band by £1,500 (£3,000).
(b) Cost £200 million (i.e 10 per cent VAT on foodstuffs); increase the personal allowance by £400 (£800) increase the general exemption limits by £200 (£400); increase both age exemption limits by £500 (£1,000) or widen the 35 per cent rate band by £4,500 (£9,000).