BT Facing Illegal State Aid Complaint

by Robin Pilgrim, LawAndTax-News.com, London

16 April 2004

According to a report in the Times newspaper this week, the European Commission is set to examine allegations that the UK's monopoly telecommunications provider, BT, is receiving illegal state aid from the government of the United Kingdom.

Rival provider, Vtesse Networks has argued that, as a result of a one-off deal with the Inland Revenue, BT saves more than £1 billion per year in business rates, paying just £250 million on its network in 2003, rather than the £1.39 billion which would have been levied on a rival of equivalent size.

The estimation of 2% of relevant revenues rate was reached in an out-of-court settlement nine years ago between the telecoms firm and the UK tax authority, during which it was suggested that BT was a "unique national institution", which required an individual rates assessment.

However, Vtesse has alleged that:

"This differential taxation for the same or equivalent transactions constitutes 'state aid', is illegal and breaches both English and European law."

The Deputy Prime Minister's Office, which handles business rate matters, confirmed on Wednesday that it had received a letter from the EC, and announced that it was "considering its response", according to the Times. However, BT revealed that it was unaware that such a complaint had been made.

"We have received no notification from either the Commission or the UK government but would, in the event of any inquiry, cooperate fully," the firm told Reuters, adding that: "We are completely satisfied that the agreement we reached with (the government) was wholly above board."

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