UK's 3G Tax Rebates Claim To Go Before The European Court Of Justice

by Jason Gorringe, for LawAndTax-News.com, London

07 October 2004

According to a Financial Times report, a dispute between British mobile phone operators and the UK government regarding VAT rebates on 3G licences that were purchased at the height of the telecoms boom has been referred to the European Court of Justice.

If the mobile phone operators are successful in their attempt to prove that the £22.5 billion that they spent on the licences in 2000 included VAT, the UK government (and by extension all other European governments which issued such licences) could be obliged to make big pay-outs.

The FT report revealed that the VAT tribunal before which the firms were arguing their case has highlighted six main issues in need of clarification by the ECJ. One such area is whether the auction of the licences by the government should be deemed a telecommunications activity, as the telecoms firms have argued that it should.

"The meaning of the word telecommunications could decide this case," Grant Thornton VAT specialist Paddy Behan told the FT, continuing: "And if the operators' definition is accepted by the court, it is hard to see how they could lose."

This is because the UK government is using as its defence the sixth European VAT directive, which does not normally define governments as engaging in economic activity.

However, the VAT tribunal wants the ECJ to probe an alternative reading of the directive which says that public authorities can be deemed to be engaging in economic activity if a transaction takes place in one of thirteen industry sectors, which includes telecommunications.

Recommended