Freeserve, which is owned by Wanadoo of France, must pay VAT on its services. Its complaint is that its biggest rival, AOL Time Warner, is at a competitive advantage because ISP based outside the European Union does not have to pay VAT. Freeserve is calling for a level playing field among ISPs for tax purposes.
The Times reports that Freeserve issued its threat in a letter to the Customs and Excise Minister Paul Boateng. The company has also complained that its letters to E-commerce Minister Douglas Alexander received no reply.