British Telecom could be forced to pay back hundreds of millions of pounds in "unfair state aid" as a result of an ongoing European Commission investigation.
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After an official complaint from BT rival Vtesse and concerns expressed by other rivals, the European Commission has asked the UK government to explain why BT currently pays two or three times less property tax on its telecoms infrastructure than other telecom companies.
The tax formula that applies to BT dates from 1995 and was established by the Inland Revenue’s Valuation Office Agency (VOA) after the UK telecoms industry was opened up to competition in 1992.
Since then, however, the telecoms market has changed with the widespread roll-out of optical services, which BT’s rivals commonly rely on to deliver their services to users.
Their overall property tax on this newer infrastructure can be two to three times higher than BT’s overall tax bill, according to Vtesse, adding that this could result in unfair competition in the market.
The Department of Trade and Industry was reviewing the tax formula that applies to BT, along with Hull-based Kingston Communications. However, a report from the DTI which was due last year has not yet been published.
The commission has demanded to know why the report has been delayed and what conclusions the DTI has so far reached.
The commission has said that if BT’s property tax formula is found to be in breach of European competition rules, the company could be forced to pay back every penny since the formula came into operation in 1995.
For more information on the commission's report on the ongoing investigation click here >>