Lamont 'will accept European VAT deal'

A DEAL on the controversial European Community package on value-added tax is expected to be reached by Norman Lamont, the Chancellor of the Exchequer, in Brussels on Monday.

The last meeting of economic and finance ministers, Ecofin, on 29 June, did not reach agreement on nine draft directives on VAT and excise duties, designed to facilitate the abolition of fiscal frontiers for the single market.

Mr Lamont has accepted, in principle, a minimum and time- limited standard rate of 15 per cent VAT - 2.5 points below the UK's current rate - although currently zero-rated goods and services would be exempt.

But Conservative backbench opponents have criticised the package as a further tightening of the grip of Brussels, with its implicit acceptance of the principle of tax harmonisation.

Ministers have replied with a briefing note which argues: 'The need to harmonise indirect taxes to the extent necessary for the completion of the single market was a key element in the Single European Act, agreed by Lady Thatcher.'

Mr Lamont told the Commons this month that he would 'accept a Commission proposal for a time- limited minimum rate of 15 per cent, with a provision for a review no later than 31 December 1996, and provided it formed part of an overall agreement which included a satisfactory solution to the minimum rate for spirits'.

One of the critical export issues to be resolved on Monday is Scotch whisky. Other EC ministers want a zero minimum rate for wine and a higher minimum rate for spirits, of which the UK is the largest EC producer. That would mean that some EC member states would be forced to increase their duty on whisky - directly damaging the market for Scotch exports.

Mr Lamont said there was no question of the Government accepting a deal that would damage the interests of British exporters.