By: MarkJ - 26 November, 2009 (12:47 PM) - Score: 3194 - Fixed Line Broadband

The government's plan to impose a £0.50p tax on all fixed phone lines (Next Generation Fund) to help fund the rollout of next generation broadband services around the UK will also be subject to Value Added Tax (VAT). Assuming the rate returns to 17.5% at the start of next year then this would push the tax up from 50p to 58.75p per line.

The information surfaced through leaked government documents seen by The Times; elsewhere the documents confirm everything we already knew. The new tax upon a tax (don't you just love our government) proposal is likely to fuel opposition voices to what is already a very controversial subject.

A spokesman for UK ISP TalkTalk , which has already warned that 100,000 low-income homes might lose their broadband lines because of the tax (here) , said: “The original 50p a month tax is regressive and unfair. On top of all this now the Treasury will steal yet more off homes in VAT.”

The Digital Britain report set a target of 2017 for 90% of UK homes and businesses to be within reach of next generation broadband lines by 2017 (here). The tax was pegged to pocket up to £175 million a year towards the plan.

Concerns have also been raised about the government’s intention to keep the tax going, even after if its 2017 target is met (i.e. like road tax, which doesn't seem to get spent on roads). There are also fears about the difficulty in gaining fair distribution of the money itself, how the government might define a fixed phone line in the first place and the fact that the tax might not be enough to do the job.

The 50p tax certainly seems to have plenty of opponents right now. However, playing devil’s advocate for a moment, we can't see how - without a cut in the fibre tax (we think that would be a better idea) - private sector investment alone will solve the digital speed divide, well maybe in 15 or 20 years but that is surely unacceptable.