Millions of UK subscribers to US-based on-line services are in for a shock, thanks to a busy Kenneth Clarke. No sooner had the champion of smokers and single mothers closed the lid on his pure leather Budget box, than the Chancellor turned his attention to the Yanks and decided to end the legal loophole that has enabled on-line service providers such as AOL, MSN and CompuServe to escape paying VAT in this country.
Those companies have not had to pay the tax, which currently stands at 17.5% in the UK, because their data servers are based in the US. This may seem unfair, but so will its likely knock-on effect to UK users of those services.
AOL, MSN and CompuServe have all indicated they will pass on the extra costs rather than absorb them internally. Some industry observers have predicted UK users could end up paying an extra fiver a month as a result.
It isn't yet clear when the decision will take effect but until it does, UK ISPs such as Demon will still be competing with the Yanks on an uneven playing field.
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