Tax AOL now, says Freeserve

A tax loophole that exempts AOL from paying VAT in the UK could about to be closed.

A new European Directive that is scheduled to be ratified in February would mean that non-European Union businesses offering digital services in the EU would now be liable to pay Value Added Tax (VAT).

The decision has been jumped on by rival ISP, Freeserve, which has campaigned for a level playing field concerning tax. It claims the current situation is unfair and hands AOL competitive advantage.

Freeserve CEO, John Pluthero, called for the directive to be adopted immediately.

The matter is already the subject of a review by Customs and Excise but Mr Pluthero is angry it's taken the Government so long resolve the issue.

Said Mr Pluthero: "I am bitterly disappointed that despite the new European proposals Customs and Excise still refuse to make an announcement in relation to the VAT treatment of AOL.

"The UK government has been sitting on this issue for at least one year, and despite attempts by us to raise the matter with the Treasury Minister, Paul Boateng, he hasn't even acknowledged our correspondence.

"Having previously blocked this proposal, Freeserve is calling on the UK government to now implement the new Directive into UK law at the earliest possible opportunity," he said.

Freeserve claims that AOL saves at least £30 million a year by not paying VAT.

A spokesman for AOL UK said: "A review of the matter is currently underway and so far guidance from the UK tax authorities has not changed."

Freeserve has worked hard over the last few months to raise awareness over what it believes is an unfair anomaly.

In November it published newspaper ads accusing the Government of shying away from action adding that the VAT not paid by AOL could be used for "hospital beds, bobbies on the beat or teachers for Britain's primary schools".

Earlier, it had threatened to sue the Government unless it resolved the matter. It has also threatened to move to Algeria in a bid to become exempt from paying the tax. ®

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