In reply to Giles Goodall (Letters, July 12), we have already lost our power to set VAT rates to the European Union.

The EU decides the minimum rate and the goods which will be taxed. Our government was forced to apply it to electricity and gas bills.

In 1995 the EU forced us to imposed VAT at 2.5 per cent on art imports and the London art market lost 40 per cent of its business in four years.

In 1999, the EU doubled the rate to five per cent and, in 2004, it will be raised to 17.5 per cent.

We have now reached the stage where British VAT tribunals refer many cases to the European Court of Justice and when the court makes its ruling it is written into British law.

This is instant tax harmonisation.

In discussion with a delegation from Malta, the EU enlargement commissioner said the exemptions on VAT given to the UK and Ireland were merely "transitional" and they would have to come into line with a harmonised European VAT system.

In Malta's accession treaty - to which the UK is a co-signatory - is a formal commitment that by January 1, 2010, all EU members will levy VAT on food and medicines.

EC document COM(96)328, produced in July 1996, states different national exemptions and rates for VAT are "a distortion of competition".

The Maastricht treaty, Article 3, paragraph (g) states: "The Community shall include a system ensuring that competition in the internal market is not distorted."

The European Commission can make its own rulings in these cases, which means, by signing the Maastricht treaty in 1992, the UK government forfeited its right to veto.

The EU's sixth VAT directive, signed by the Labour government in 1997, calls for VAT harmonisation by 2004.

VAT could be applied to new houses and land, food, children's clothes, newspapers, books and passenger transport.

Once the EU has imposed these taxes, it will be impossible for a future UK government to remove them, unless we leave the EU altogether.

-Tony Bellamy, Hove