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UPDATE UK VAT Tax Rise to 20 Per Cent Will Push Broadband ISP Prices Up

Posted: 23rd Jun, 2010 By: MarkJ
parliament VAT rise UKThe UK governments Chancellor, George Osborne, has revealed plans to increase the rate of Value Added Tax (VAT) from 17.5% to 20% from 4th January 2011. The increase will raise £13bn a year to help plug the national debt. Much as you would expect it will also hit the price that we all pay for our broadband services.

There's a small consultation to be had in the fact that the new government confirmed it would scrap Labour's 50p per month tax (Next Generation Fund) on all fixed phone lines, but then that was already a foregone conclusion. The VAT rise, while necessary, will hit all your services.

Elfed Thomas, CEO of fibre optic infrastructure specialist i3 Group UK, commented:

"We are delighted that this new coalition government is continuing its positive response to developing next generation broadband by dropping the ludicrous and unfair tax which had been proposed by the previous Government.

Rather than encouraging companies like ours to provide an infrastructure for next generation services, the tax would have driven innovation out of the UK and created an uncompetitive market. This would have resulted in both service providers and consumers losing out.

The private sector is perfectly well placed to deliver next generation broadband – as we are already demonstrating through our Fibrecity network, the UK’s largest fibre to the home initiative which will connect one million homes over the next four years."

Those seeking to retain the benefit of a lower VAT rate before January next year might find pre-paying for longer contract options to be attractive. However we always recommend caution with those and suggest only considering such a move when you are confident in the ISPs quality.

UPDATE 11:37am

Added a quote from i3 Group's CEO about the dropping of Labour's 50p phone line tax to fund next generation broadband services. The new government plans to gain slightly less cash from the BBC Licence fee's Digital Switchover budget instead.
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