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July 3, 1997updated 05 Sep 2016 1:04pm

BRITISH TELECOM FACES GBP500M UTILITIES TAX OVER 2 YEARS

By CBR Staff Writer

The UK government yesterday ended months of speculation about its plans for so-called windfall taxes with the result that British Telecommunications Plc faces a bill of up to 500 million pounds ($835 million) due to be paid in two installments over the next two years. The figure is substantially lower than many earlier predictions, which suggested that the company could have faced a levy of up to 1 billion pounds. BT has long maintained that it does not qualify for the levy, which Chancellor Gordon Brown calls a levy on excess profit made by former state-owned companies now regulated. The tax should not apply to BT for two reasons. One, we are not a utility and two we are not a monopoly – we have 150 competitors in the UK. We see no justification for taxing BT in this way, when the company has made no excess returns and is neither a monopoly nor a utility, said BT in a statement. Uniquely amongst the privatized companies, its return to taxpayers since privatization have been greater than its returns to shareholders. However, the Chancellor does appear to have taken account of BT’s unique position in calculating how much BT is to pay. Unlike the all other utility services including water and electricity companies, BT has paid both corporation tax and Value Added Tax, since the original share sales. None of the other utilities’ services is subject to VAT. The sale of shares in BT raised a total of 51 billion pounds for the former Conservative government. BT’s contribution is part of a total windfall tax that will raise 4.8 billion pounds from former state-owned utility companies for the government. Although BT had threatened court action if it were hit by a windfall tax the action now looks less likely with BT looking for concessions from the government for agreeing to the charge. The two payment will be made on December 1, 1997 and the second a year later.

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