Mrs Thatcher last night rejected an appeal from the Labour leader, Mr Neil Kinnock, that all VAT revenue raised on sales of the charity record 'Do they know it's Christmas?' should be given to famine relief. The SDP leader, Dr David Owen, had made a similar written suggestion to the Chancellor of the Exchequer, Mr Lawson. In her reply to Mr Kinnock's letter Mrs Thatcher said it would not be right to treat 'this fund-raising operation as a one-off case.' She asked: 'How, in fairness could we contribute the VAT raised on the Band Aid record to the fund-raising cause, but refuse it in all other cases?'
All the money raised by the sale of the record, associated videos and T-shirts, is going to relieve the famine in Ethiopia. A Commons motion urging the Chancellor to give the equivalent of the sum raised in VAT to Ethiopian famine funds has been signed by 75 Labour and four Liberal members, but no government backbenchers have put their names to it.
The record is a world bestseller, and sales in Great Britain are already thought to have brought in nearly pounds 250,000 in VAT .
In his letter to the Prime Minister, Mr Kinnock said there was a widespread view that VAT should not be levied on the record. He believed this was a reasonable view and thought a Treasury contribution equivalent to VAT takings would ensure that the good intentions of those who made and produced the record were fulfilled.
'This would, of course, be an exceptional act,' Mr Kinnock said, 'but clearly the Ethiopian famine and the magnificently generous response of the British people to the horror have produced exceptional circumstances which would certainly justify special recognition by the Government.'
Government resistance to relaxing the tax treatment of charities was restated in a Treasury written answer on March 2 this year. It argued that the general removal of VAT liability from charities would cost the Exchequer tens of millions of pounds of revenue.
