UK internet service provider (ISP) Freeserve is turning up the heat in its campaign against rival AOL, claiming that the US company is benefiting from a tax advantage.
Freeserve launched its ‘AOL Vatometer’ campaign a few weeks ago after a Merrill Lynch report revealed that AOL does not pay VAT in the UK because its service is provided from the US.
As a result Freeserve is demanding that the situation be changed, claiming that AOL is saving over £30m a year in VAT and that this puts other ISPs at a competitive disadvantage in the UK.
Freeserve now claims that, since the Merrill Lynch report was published 22 days ago, AOL has saved £1,808,219. It reckons that AOL’s annual VAT saving could have been used to train and pay for 676 policemen or 1371 teachers, or even buy 63,158 computers for schools.
The UK ISP is challenging in court the Customs & Excise tax rules which mean that AOL does not have to pay VAT in the UK, on the basis that the company earns an extra £2.6m in unpaid tax for every 100,000 customers.
But AOL insists that it is fully compliant with ‘all applicable laws in all territories in which it operates. In the UK, AOL is subject to the relevant UK tax authorities. Since the AOL service was first made available in the UK in 1996, those authorities have recognised that the hub of AOL’s global network is based in the US’.