Freeserve has written to UK Customs & Excise and Chancellor Gordon Brown requesting a change in the tax system to place all ISPs in an equal position for tax purposes. The company is not suggesting that AOL has acted illegally, but rather that the laws themselves are designed in a way that benefits ISPs based outside the UK.
According to a Customs & Excise ruling in 1997, an internet content service provider based outside the UK does not have to pay VAT, but Freeserve argues that AOL should be classed as a telecommunications provider and so ought to be liable for VAT. The company claims that the current situation gives AOL an unfair advantage and that the amount of VAT owed by the company, if the rules were to be changed, would be around £30 million per year.
AOL defended its position, saying:
“In keeping with the ruling of UK tax authorities, AOL is treated as a provider of information services from outside the European Union, a status available to any other similarly positioned provider.”