£6 broadband levy may be trebled for homes with multiple lines

Published 26th Nov 2009

A controversial new £6 tax on telephone lines to fund the introduction of superfast broadband internet will leave nearly two million households paying up to three times the levy initially proposed by ministers, according to leaked government documents seen by The Times.

The plans, drawn up by Revenue & Customs, show that ministers will tax households with more than one phone line — of which there are more than 1.7 million — for each line they rent, and will also levy VAT on the charge.

Families with one telephone connection, a separate line for broadband and another for a fax would end up paying £21.15 a year, instead of the originally announced £6. The Finance Bill, to be published early next year, will contain the plans for the 50p a month tax, which ministers hope will raise up to £175 million a year to fund superfast broadband connections for rural areas.

When the plans were announced in June it was assumed that the charge would be levied on each household only once.

The document, leaked to the Conservatives, shows that the Treasury stands to gain a further £30 million annual windfall, because ministers have decided to charge VAT on top of the new levy, essentially creating a tax upon a tax. They have also opted to widen the charge to also tax high-speed fibre-optic connections, and not only the standard copper lines.

Internet service providers (ISPs), which have warned that the extra fees will drive 100,000 homes off broadband, are furious about the plans. Carphone Warehouse, the second-largest ISP, said that the plans “add insult to injury for consumers”. A spokesman said: “The original 50p a month tax is regressive and unfair. On top of all this now the Treasury will steal yet more off homes in VAT.”

Telecoms companies are also angry that the plans will encourage them not to separate the tax on itemised bills, which they claim is an attempt by the Government to hoodwink consumers into thinking that the new charge has come from their phone supplier.

The document states: “There will be no requirement on owners or retailers to show the duty separately on their billing to end users. This is to prevent costly systems changes for line owners that might arise from having to account for the tax on individual invoices.”

The Conservatives have already said that if they win the general election they will scrap the plans. Jeremy Hunt, the Shadow Culture Secretary, said: “This Government is simply unable to level with the public. This tax hasn’t even been implemented, yet they are already looking to triple it. How can they possibly square a commitment to universal broadband access if they are massively hiking the prices consumers will have to pay for it?”

Many businesses have multiple phone lines and will also be hit by the charge. The CBI said that the Government must come clean on the full extent of the plans.

Sara Draper, head of knowledge economy at the CBI, said: “Businesses will benefit from next-generation digital infrastructure and they are up for paying their fair share. But the costs must be kept proportionate, and so the Government needs to clarify exactly how the charges will apply to individual businesses with multiple lines.”

A spokesman for Sky, another ISP, said: “This is a question of basic fairness. A telephone licence fee will penalise the less well-off so that faster, premium-priced broadband services are available to an unknown number of people in rural areas who both want and can afford them. This is not a good basis for a universal tax.”

A government spokesman said: “We do not comment on the contents of leaked documents. It is vital for jobs and growth that Britain has a world-class digital infrastructure. Next-generation broadband brings a range of innovative services and applications with wide business, health and social benefits.

“We want everyone to experience the opportunities that next-generation broadband offers, which is why we plan to introduce a 50p levy on all fixed lines to help the market to access homes and businesses in hard-to-reach areas.”

Source: ' Times '

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