asked the Minister for Finance if he will estimate, on the hypothesis that VAT were applied at 5 per cent to foodstuffs and the yield applied in relief of higher VAT rates, by what percentage it would be posible to reduce the 23 per cent rate.
497.
Written Answers. - VAT Rates.
496.
asked the Minister for Finance if he will estimate the effect on the Consumer Price Index if VAT were applied to foodstuffs at 5 per cent and if the yield were applied in relief of the 23 per cent rate.
I propose to answer Question Nos. 496 and 497 together.
It is estimated that if the full year yield from the imposition of VAT at 5 per cent on foodstuffs (taken to mean VAT zero-rated food and drink for human consumption, excluding oral medicines) were applied for the purpose of reducing the level of the post-1 March 23 per cent rate, a reduction of approximately 2 per cent would be possible, giving a revised rate of 21 per cent.
On the assumption that the application of VAT at 5 per cent to the foodstuffs mentioned above would result in an equivalent percentage rise in price, the full year impact on the Consumer Price Index would be to raise it by about 0.9 per cent. Conversely, assuming a price reduction commensurate with the 2 per cent reduction in the 23 per cent rate, for the items liable at that rate, the full year impact on the Consumer Price Index would be to lower it by about 0.8 per cent.
Overall then, these measures would have a very slight impact on the Consumer Price Index rising it in a full year by around 0.1 of a per cent.