UK Government Rejects Broadband Tax Plans

by Jason Gorringe, Tax-News.com, London

05 December 2001

The government has responded to a report issued yesterday by the Broadband Stakeholders Group (BSG) asking for tax incentives in order to stimulate investment in broadband networks in the UK.

In the report, the BSG, which is chaired by Labour E-Commerce Minister, Douglas Alexander, made 15 proposals, which included encouraging infrastructure sharing among UK telecom operators, and continuing to promote competition between retail providers of British Telecom's wholesale broadband services. Of these, 14 were warmly welcomed. The 15th proposal, which called for tax breaks to encourage infrastructure investment, was roundly rejected by the government.

The BSG had argued that the introduction of some kind of fiscal incentive to reduce the cost of capital investment in the sector could help the roll-out of networks in more remote and rural areas.

However, in a statement responding to the BSG report, the party line was made very clear: 'The Government believes that the use of the tax system to support particular types of investment should be limited to cases where there is clear evidence of market failure, sufficient to justify the costs of intervention, and the tax system is judged the most effective instrument for achieving policy goals,' it explained. 'The Government does not believe that the criteria apply in this case.'

Mr Alexander agreed that despite the views expressed by the Broadband Stakeholder Group, in his opinion the debate had become too centred on the provision of infrastructure, and needed to concentrate more on why people wanted such services, and how to encourage businesses, schools, and organisations to take greater advantage of them. 'It's a bit like talking about plumbing when what people want to know about is the water,' he explained.

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