The millennium shall end as it began, the churches rendering to Caesar – that is the state – that which belongs to Caesar, though at severely damaging VAT rates under an unreformed VAT system.
Successive governments have pursued a tax strategy of lessening the direct tax burden and switching this to indirect taxes.
The chancellor of the Exchequer in 1995 declared that ‘since 1979, this government has shifted the tax burden away from direct taxes, which fall on income and employment, and towards indirect taxes on consumption and spending’.
This policy actually began in 1978 under a Labour government. Then the basic rate of income tax stood at 35%; now it is falling to 22%. In 1978, the standard rate of VAT was 8%. Now it is 17.5%.
The Church of England points out that the shift from direct to indirect taxation not only costs it by way of reduced revenue from covenants – because the rate of income tax is lower – but adds £33m a year to their bills for church repairs – and £60m for repairs to churches of all denominations.
The scope of VAT during the last 20 years has been extended to charges on church halls, the heating of buildings and church bells – all items that were once tax-free.
An insurance premium tax has also been introduced, so that not only must the Church maintain a rich heritage of churches and cathedrals, it must pay an additional tax of £1m for the responsibility.
VAT is also payable on furniture, stationery, computer equipment and the like, and Customs & Excise collects some £200,000 a year in tax on the wafers and wine that constitute Holy Communion.
In the past governments have helped the whisky and gambling industries, football clubs and the British film industry.
To help the churches, however, a root-and-branch reform of VAT would require changes not only to our own tax laws but to those of the European Union.
Faith may indeed be capable of moving mountains – but can it change the attitude of the Exchequer as it hands around its own VAT collection plate?
– Stuart Bell is MP for Middlesbrough, second Church estates commissioner and adviser to Ernst & Young.
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