EC clarifies telecoms tax probe

A European Commission investigation into possible state aid given to BT Group was made clearer last week, as the EC revealed it would be examining the company’s tax payments.

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A statement from the commission said that it would be looking to determine if the rates of tax gave an unfair advantage to certain operators.

‘On the assumption that the difference in business rates for taxation among these operators involved state aid and conferred a selective advantage upon certain players, it would alter their competitive position on the market and hence distort competition,’ the EC statement said.

A warning was also issued by the EC. ‘The commission wishes to remind the United Kingdom that the EC treaty has a suspensory effect and that all unlawful state aid may be recovered from the recipient,’ it said.

A statement from BT said it was confident the EC would find no grounds for the complaint, which came from fellow telecoms services provider Vtesse Networks.

In its 2004 annual report, BT Group declared an effective corporation tax rate of 27.7%. On group profit of £2bn the company said tax would be £568m. Vtesse’s accounts for the year to 31 December 2003 show a loss of £421,000 on turnover of £2.3m. The company received £59,000 tax credit.

BT chief executive Ben Verwaayen was interrogated by the Commons trade and industry select committee on Tuesday to defend the company against calls for a breakup.

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