It was revealed yesterday that Virgin.net, the new flat-rate internet service which is a joint venture between the Virgin Group and cable provider NTL, has established its financial base on the low tax island of Madeira.
According to a report in The Times on Monday, this means that the venture, which was launched in December, will pay no corporate income tax, and will pay only 12% VAT, compared with the 17.5% rate paid by its British competitors.
Freeserve, which is currently involved in a furious row with US-based AOL, which pays no VAT in the UK because it is deemed to provide content rather than telecoms services, announced on Monday that it was not surprised that Richard Branson's latest brainchild had chosen to tax refuge in the Portuguese-owned offshore jurisdiction.
Paul Barker, a spokesman for UK-anchored Freeserve predicted that: 'AOL will look at a similar scheme once their VAT position in the UK has been determined and the existing loophole is closed.'
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