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The European Commission have put forward a proposal that suggests the elimination of certain reduced rates of VAT. The proposal has been met with a negative response by the Institute of Directors.

The EC’s green paper proposes that the removal of these reduced VAT rates should be decided by a majority vote. This will withdraw the UK’s prevention and standardising of administrative rules, the VAT threshold and reduced rates, including the zero-rated VAT on children’s clothes.

The IoD responded to the proposal by saying that any advantages of getting rid of reduced rates of VAT would “outweighed by the disadvantages of preventing elected governments from adapting VAT to suit the circumstances of their own countries”.

Richard Baron, head of taxation at the IoD, said: “It is sensible for the commission to stand back and take a long, hard look at the way in which VAT operates. It is a massive burden on businesses, and prone to fraud, so improvements are always welcome. But we must beware of any assault on national tax powers, or of any tendency to assume that the man in Brussels knows best. We hope that the UK government will resist many of these proposals.”