Until now Eircom and Esat BT have been levying 21 per cent VAT rates on consumers for connections to the telephone system, writes Jamie Smyth, Technology Reporter
Confirmation that the Revenue Commissioners and Eircom are in talks about amending the VAT rates that are levied on customers connecting to its network is good news for consumers.
Connection fees are not cheap and can be a significant burden for customers seeking to connect a new apartment or home to the national telephone system. The standard connection fee for a typical home phone is now €107, while the standard Eircom broadband internet connection charge excluding VAT stands at €81.
Until now Eircom and Esat BT have been levying 21 per cent VAT rates on consumers for connections, adding more than a fifth to the standard price of a service.
But all this was set to change last year following a landmark judgment in the Supreme Court, which ruled in favour of the cable television firm NTL against the Revenue Commissioners.
NTL, which first filed the case back in 1989 when it was known as Cablelink, argued that connections fees should be treated as a service rather than a product and therefore be subject to a lower 13.5 per cent VAT rate. The Revenue opposed NTL's opinion and sought to maintain the 21 per cent rate for cable TV connections.
Both the High Court and the Appeals Commissioner ruled in favour of NTL in the 1990s persuading the company to begin levying the lower 13.5 per cent rate from 1996 onwards before the outcome of the Supreme Court case.
Despite the Supreme Court ruling - which was expected to set a precedent - Eircom and Esat BT continue to levy the higher VAT for connections.
Esat BT said yesterday it had not received a communication from the Revenue following the NTL case on the issue of whether it should change its VAT rates.
Eircom said it was in discussions with the tax authorities on the matter but said it was not in a position to change its VAT rates on connections until it received clarification on the issue. The firm also said there could be complications with regard to its eligibility for the lower VAT rate, depending on the value of service it would provide to customers.
But while the discussions drag on it is likely that a growing number of consumers are being overcharged VAT. Recent figures released by Eircom show more than 100,000 customers have been connected to its network over the past 12 months, many of whom will have paid VAT at the 21 per cent rate.
Eircom and the Revenue both said it was possible that a rebate could be given to customers if it was found they had been overcharged during this period. But the issues are complex, according to Mr Aidan Fagan, a tax adviser with accountancy group Deloitte, who said this would require the Revenue to offer a VAT rebate to Eircom which could then be passed onto customers.
Given that it took almost 15 years to settle the NTL case in the Supreme Court, consumers should not be made to wait much longer for the Revenue to make a decision on the correct rates.
