The UK, along with most European countries, charge Value Added Tax (VAT) on most goods and services. The ‘standard rate’ for this in the UK is 20% having previously been at rates of 17.5% and 15%.
What most people may not realise is that there are goods and services taxed at lower rates, typically as they fall into the scope of an ‘essential’ service. This includes children’s clothes and books, which are charged at the ‘zero rate’ (0%) and domestic heating and energy, which is charged at the ‘reduced rate’ of 5%.
Telecommunications and Internet access, however, are charged at the standard 20% rate.
ISPA released the results of a report in advance of its annual Parliament & Internet Conference today, which says that almost three-quarters (72%) believe fast, reliable Internet access should be a right in the UK.
This begs the question if electricity and gas, something we can probably all agree is a right given its importance in modern life, is charged at 5%, then why is Internet access charged at 20%?
We know that the best deals for everything can be obtained by shopping around online. Government services are increasingly requiring Internet connectivity to access. We also have subsidised Internet rates known as social tariffs to ensure everyone can afford broadband, yet even these remain charged at 20% VAT.
Mark Tomlinson, CEO of Country Connect, who was recently interviewed by Richard Tang just asked this question on this way to the Parliament & Internet conference too:
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Governments hate reducing VAT on things not only for loss of revenue but the retailers tend to just keep the difference and the price stays the same. It may not happen immediately but within a few months after the decrease they put them up.
There’s plenty of things with VAT that should have it reduced before broadband. Significant portions of food and drink still include it.
If it were to be cut, it would be unlikely to result in an actual cut in the retail cost, it would just be one less cost for the ISP.
I believe it’s hot food like take-aways, but not basic food from supermarkets. Obviously it would only make sense if the end consumer benefitted, but in a competitive market that should happen.
No. Many foods are charged VAT. Remember the court case as to whether Jaffa Cakes are cakes or biscuits, which decided whether or not VAT should be charged.
I love to see all brand new cars at 5% VAT not 20% VAT. Also Broadband, Mobile and Energy should be 0% VAT.
You can buy a second hand car (which is without VAT mostly assuming VAT not reclaimed for business on first registration)? You can’t buy a second hand broadband service.
The government will not reduce the VAT on broadband, they would lose so much money if they did.
Is broadband an essential service? No, you can live without it, difficult to live without electric.
Would i like VAT to be reduced on broadband, yes, but then again would it make any difference in the long run as broadbands providers will just increase prices