EC Issues Update On BT State Aid Probe

by Ulrika Lomas, for LawAndTax-News.com, Brussels

14 March 2005

The European Commission earlier this month issued an update on the formal investigation assessing the way in which a property tax is applied to the UK's incumbent telecoms operator, British Telecommunications (BT).

The Commission is examining whether the way in which the so-called “business rates” tax is levied on telecommunications infrastructure belonging to BT complies with EC Treaty rules requiring member states not to grant aids or subsidies, and does not distort competition in relation to other telecommunications operators.

The base of the “business rates” tax is determined for each telecommunications operator by the Valuation Office Agency (VOA), an executive agency of the UK’s central government. The VOA applies various valuation methods to assess the economic value of telecommunications networks.

However, according to the EC, the VOA applies a certain asset valuation method to BT, while it applies other methods to its competitors. The Commission argues that the application of different methods may favour BT, resulting in a disproportionate tax burden for other companies competing in the market for electronic communications services.

In addition to clarifying the probe's scope, the Commission stated that it wished "to remind the United Kingdom that the EC treaty has a suspensory effect and that all unlawful state aid may be recovered from the recipient".

Meanwhile in a statement, BT expressed confidence that the EC would find that the initial complaint, made by rival telecoms firm Vtesse Networks, to be groundless.

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