11. VAT ON THE IMPORTATION OF WORKS
OF ART (7858/99)
Letter from Lord Tordoff, Chairman of
the Committee, to Dawn Primarolo MP, Paymaster General, HM Treasury
At its meeting on 20 July 1999, Sub-Committee
A considered this document, with the help of your Explanatory
Memorandum of 22 June 1999. It noted that the date of expiration
of the United Kingdom's derogation (allowing it to charge VAT
at less than 5 per cent) had already passed. It supported the
Government's implicit wish to maintain the status quo,
and asked me to enquire what further action you intend to take,
in view of the damaging effect which this uncertainty is likely
to have on the market. We should also be glad to see a copy of
the consultants' report, which you suggest does not support the
Commission's conclusions. Meanwhile, we are holding this document
under scrutiny.
23 July 1999
Letter from Dawn Primarolo MP, Paymaster
General, HM Treasury,to Lord Tordoff, Chairman of the Committee
Thank you for your letter of 23 July 1999, about
your committee's consideration of the European Commission's report
on the effects of VAT on the competitiveness of the Community
art market.
As you observed, it was not the Government's
wish to increase the rate of VAT on art imports, and we lobbied
hard for support for maintaining our special reduced rate. That,
however, would have required unanimous agreement, and regrettably
the support necessary to persuade the Commission to make a proposal
for such change did not materialise.
While I was considering our position I sought
the best legal advice available to the Government. Ultimately
I was compelled to conclude that there was no viable choice but
to legislate for the increase in import VAT (2.5 per cent to 5
per cent). You will know by now that the necessary legislation
was brought into the Finance Bill at Report stage, and came into
effect on 28 July 1999.
At the same time I announced a concession which
extended the scope of the new 5 per cent reduced rate to a much
wider range of art imports than before. Representatives of the
UK art market have acknowledged the considerable effort the Government
has made on their behalf, and welcomed that concession, anticipating
that it should help them to maintain the UK's competitive position
in the international art market.
I trust that this resolves your enquiry, and
I enclose as you requested a copy of the consultants' report (not
printed).
24 January 2000
Letter from Lord Tordoff, Chairman of
the Committee, to Dawn Primarolo MP, Paymaster General, HM Treasury
Thank you for your letter of 24 January, replying
to mine of 23 July 1999, and for the copy of the consultants'
report which you enclosed. We continue to regret that the Government's
view did not prevail in the Council, but we congratulate you on
having been able to make the other changes you describe which
will mitigate the effect on the London art market.
We have been holding the document under scrutiny
awaiting your letter, but we have now cleared it.
3 February 2000
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