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Friday, 5 March 2010

Fighting the Fibre Rates Issue

Fibre rates (business taxes on fibre optics) have been identified as one of the causes for the connectivity problem in the UK. Trefor Davies of Timico has written an excellent post on the fibre rates inequity. Below is an email from Aidan Paul, CEO of Vtesse. If we are to solve this problem and advance new fibre lay in the UK, required for Next Generation Access, your support is required. Please complete the form at the bottom of the page to receive the documents referred to in the letter.

As you are aware, we have long been fighting for equal treatment with BT under the Business Rates system, under which up to last week we have been liable for between 20 and 40 times the rate we estimate that BT pays on its 11 million kilometres of fibre.

Whilst we lost our last case on a 2:1 split in the Court of Appeal[1], we are determined to continue, not least because of the strongly worded dissenting judgement from Lord Justice Sedley, reproduced below.

We have filed an application in the Supreme Court for permission to appeal the judgement, and we are now asking for your support in this. The appeal turns on whether the burden of proving discrimination should fall on us or on the tax authorities. It is particularly important that we demonstrate that this is of general public importance. Since there is no guarantee that our petition will be heard, the level of public interest is very important as it will be taken into account by the Court in deciding whether to hear our case.

Although the legal route has not yet directly produced the result in law we would seek, the process and our political lobbying with the wide support of others has:-

* strongly influenced Conservative policy,

* contributed to a Parliamentary Select Committee report highly critical of Rates[2] on fibre;

* and secured a substantial reduction in the so-called Tone, the rate applied to fibre, backdated to 2005.

This reduction was produced less than one month after the handing down of the Court of Appeal decision with its dissenting judgement. This is hardly a coincidence.

Many operators will have gained a windfall profit as a result of our, and others’, efforts on reform.

We are therefore asking for your support and for you to write a letter to the Supreme Court. There is a relatively brief procedural window within which the Court will accept these letters so please do so as quickly as possible. We have attached to this email [the docs are linked below this letter] the full address and references, and an indication of what we would expect such a letter to contain. It is important that you express this in your own words.

In rural areas, the tax burden is higher that in urban areas, as the fibre distances are longer, and revenues are lower, so equal treatment is particularly important.

To provide assistance, I have also attached two parts of our Supreme Court submission, the first of which is an overview of the case, and the second is our Grounds for Appeal.

In essence, our case is that having established evidence of discrimination, the VOA (assisted if necessary by Ofcom) should work out what the right level of tax should be that would not discriminate between BT and other operators. It has always been impossible for us to work out the right figure, because we do not have, and have been refused access to, the detailed information which would allow us to make an accurate calculation.

There are various procedural aspects to any letters of support, which we will handle for you. We ask, therefore, that you address the letter to the Court but send it to us and our solicitors as your agents for service will look after the procedures for serving it or copies of it on both the Supreme Court and the HMRC solicitors. Our address is Vtesse Networks Limited, John Tate Road, Hertford, Herts SG13 7DT, fax 01992 582100, or scanned and email above.

If you have any questions at all about this process, then don’t hesitate to contact me.

Yours sincerely

Aidan Paul

Lord Justice Sedley said:-
“It is now evident . . . that Vtesse has a tenable argument that, contrary to the VO's case and BT's claims, the 2008 Ofcom report shows that it is possible not only to disaggregate BT's rateable holdings but to assign a hypothetical rental value to their fibre-optic cables. If that can be done, there is arguably a gross disparity in BT's favour between the rateable value of its and Vtesse's cables.
. . . . By contrast, the injustice of allowing the continuance of what may be a radical inequity in the rating system will go unredressed by the proposed disposal.”

BIS Parliamentary Select Committee Chairman Peter Luff MP explained:
“Government intervention at this stage should concentrate on changing policies to encourage investment in the NGA market. Perhaps the best example of this is the business rating system which currently discriminates in favour of BT and against its competitors. We believe that the Government should consider a reduction, or even a temporary removal, of business rates on fibre optic cable. This would be a more effective use of limited public sector funds than direct financial intervention.”




By completing the form below you will receive three documents
The Case Background PDF 395K
The Grounds for Appeal PDF 601K
A Sample Letter to send to the Supreme Court DOC 26K

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To receive the documents relating to the Supreme Court Appeal, please enter your email address below

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