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Unused phone lines to be taxed for rural broadband

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Unused landlines will be taxed under government plans to subsidise rural broadband, and VAT will be charged on the new 50p per month tax.

"The duty will be payable on all local loops that are made available for use by an owner whether or not the lines are actually used," the Treasury said today.

"It will also be payable on all local loops regardless of whether the loop consists of a copper pair, a co-axial cable or a fibre connection."

Only means-tested households subscribed to ultracheap "social phone" services will be exempted.

A consultation makes it clear that every other landline, including those used exclusively to access the internet, will be taxed from October next year. The Treasury said the landline firms had complained exempting internet only line might hit their voice revenues.

"The duty has also been designed to include broadband services to address concerns that phone users may substitute to voice over internet protocol (VOIP) services such as Skype. This design means that users that choose not to take a phone service will still pay the duty," the consulatation explained.

The Tories are opposed to the tax and have said they would look to scrap it "as soon as possible" if they win the next general election, though have not made a firm commitment.

It's currently envisaged that the taxman will collect from the physical owners of local loops - mainly BT and Virgin Media. BT's wholesale division will pass the cost on to retail ISPs and phone providers, who the government envisages will pass it on to consumers.

"Some retailers may decide to include the duty as part of the line rental or overall package charge to customers, while others may choose to add it as a separate explicit item on the bill," the Treasury said.

Premises with more than one line will have to pay the tax on each. However, for Virgin media customers, where a "line" consists of a co-axial line for internet access and a copper wire for phone, only one levy will be applied.

The Treasury said it expects to collect £175m per year, allowing fibre-to-the premises and fibre-to-the-cabinet projects to bring faster broadband to 90 per cent of the country by 2017.

BT has said it believes there is will be a business case for commercial rollouts covering only two thirds of premises. ®

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