Brussels, 20/01/2005 (Agence Europe) - The European Commission has opened a formal investigation to assess the way in which a property tax is applied to British Telecommunications (BT) and Kingston Communications (Kingston) in the United Kingdom (UK). In particular, the Commission will examine whether the way in which the so-called “business rates” tax is levied on telecommunications infrastructure belonging to BT and Kingston 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. British Telecommunications is the incumbent operator in the UK telecommunications market, Kingston Communications is the incumbent in the region of Hull. 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. The VOA applies a certain asset valuation method to BT and Kingston, while it applies other methods to their competitors. The application of different methods may favour BT and Kingston resulting in a disproportionate tax burden for other companies competing in the market for electronic communications services. In view of the complexity of the case, the Commission has decided that an in-depth inquiry is necessary to analyse the justifications for applying different valuation methods to BT and Kingston in comparison with other telecommunications operators. This inquiry will run in parallel with an ongoing review undertaken by the UK Department of Trade and Industry which is examining this tax system as it applies to telecommunications companies, including its effects on competition. The process of the Commission's inquiry requires the details of the tax measure to be published in the EU's Official Journal, allowing interested parties to provide the Commission with their comments.
In a press release, BT says it is surprised by the news that the Commission is launching formal investigations, adding that any allegation of state aid is unfounded since BT has not received any benefits from the UK government. The case was launched following complaints by one of BT's fibre optic network competitors, Vtesse Networks, which is delighted at the latest developments.