Whitehall under fire over broadband tax incentives

IT industry leaders have slammed the Government's refusal to accept proposed tax incentives to pump life into the UK's flagging...

IT industry leaders have slammed the Government's refusal to accept proposed tax incentives to pump life into the UK's flagging broadband infrastructure.

The Government accepted 14 out of 15 measures proposed by the Broadband Stakeholders Group (BSG) when it published its UK Online strategy document this week, but drew fire for failing to announce new tax incentives which had been called for by the group.

David Harrington, director general of the Communications Management Association, said, "It is a great opportunity missed - there is nothing to give confidence there. We were half prepared for such a response when the pre-budget statement failed to mention tax breaks for broadband.

"There should be tax credits for suppliers and tax relief for users to make the outlay on broadband tax-deductible. If the Treasury is worried about a return on its 'investment' it needs to look to the South Korean example, where comprehensive government encouragement saw a return in 16 months."

Rejecting the BSG's call for tax incentives, e-commerce minister Douglas Alexander pointed towards existing tax breaks, such as the ability of small businesses to claim 100% first year allowances on broadband investment.

The DTI unveiled a package of measures including: clarifying existing tax measures to encourage teleworking; an undertaking to engage with the private sector in a marketing campaign; encouraging the use of broadband in public services; and infrastructure sharing schemes to hasten broadband roll-out in rural areas, including a promised pilot scheme in East Anglia.

Tom Wills-Sandford, a BSG member who is IT director at the Federation of the Electronics Industry (FEI), said, "The FEI is disappointed that the Government did not recognise the importance of fiscal measures which would have given a boost to the adoption of broadband."

In a report earlier this year, the BSG revealed that the UK is currently 10th out of the 11 leading economies in broadband adoption and that even if its recommendations to improve this position are followed it would still only reach seventh place by 2005.

In February the Government set a target for the UK to have "the most extensive and competitive broadband market in the G7 by 2005".

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