Consumers will pay €8 less to connect new phone lines to their homes from this month following a change to the VAT rates levied by the Revenue Commissioners.
The decision could also enable hundreds of thousands of homeowners who have been overcharged VAT on new line connections since the 1980s to receive a refund from the State via Eircom.
Eircom, which appealed the VAT rate levied on its customers by the Revenue Commissioners, said yesterday it began charging 13.5 per cent VAT rather than a 21 per cent rate from January 10th.
The firm said the new rate was agreed following an appeal by Eircom against the previous rate, which was initiated last year when the cable firm NTL won a Supreme court case on the issue.
In this case, which dated from 1989, NTL successfully argued that it should charge a VAT rate of 13.5 per cent for cable connections rather than 21 per cent given the amount of labour required to install a phone line.
Eircom employed a similar argument in its own appeal to the Revenue Commissioners and was informed on January 10th that it could begin charging the lower VAT rate of 13.5 per cent.
The firm will now charge consumers €121.93 for new telephone line connections instead of the previous charge of €129.99.
The lower VAT charges will only apply for new telephone line connections and not re-connections to its network, which usually are charged at €24.99. The lower VAT charges also do not apply to new broadband connections, which will continue to be charged at a rate of 21 per cent.
It is estimated that 70,000 people connected to Eircom's network in 2004. Connections have increased over the past two decades with a rise in house building.
It is possible that thousands of people who connected to the Eircom network since the 1980s could now get a refund on connection fees.
A Revenue Commissioners spokesman said last night it would enter discussions with Eircom to establish whether the firm could track and reimburse customers that were overcharged.
The task of identifying customers who had been overcharged for new line connections would be a major logistical exercise for Eircom.
An Eircom spokesman said that it was up to the Revenue Commissioners to decide whether to refund customers for VAT paid.
Under Irish law, consumers should be in line for a VAT rebate, according to Mr Aidan Fagan, indirect tax partner at Deloitte.
"In broad terms, the service provider would have the right to reclaim the overpaid VAT from the Revenue Commissioners and equally the Revenue would have to repay this to Eircom."
"This would be subject to a time limit of four years if the claim was only lodged now or back further depending on when the claim was first made."
Meanwhile, between February 7th and March 31st Eircom will offer a free telephone connection to customers who do not have a standard telephone line.
