Freeserve keeps check on AOL's VAT saving

Internet service provider Freeserve is continuing its campaign against fellow ISP AOL by running an "AOL VATOMETER" to back up its claim that its rival is benefiting from an unfair tax advantage.

A report issued late last month by Merrill Lynch showed that AOL did not pay VAT in the UK, because its service is provided from computers based in America. Since then Freeserve has repeatedly called for this situation to be changed, claiming that AOL is saving £30m a year -- which Freeserve believes gives it a significant and unfair advantage over rival ISPs.

According to a statement released by Freeserve on Tuesday, AOL has saved £1.8m since the publication of the Merrill Lynch report. Freeserve is claiming that AOL's £30m annual saving could be used to fund 676 new policemen, 1371 newly qualified teachers, winter shelter for over 70,000 people or 63,000 new PCs for schools.

Such statistics are unlikely to have much effect on AOL, which has repeatedly insisted that it is doing nothing illegal. "Since the AOL service was first made available in the UK in 1996, those authorities have recognised that the hub of AOL's global network is based in the US," said AOL in a recent statement, adding that, "The UK tax authorities have ruled that AOL is a provider of information services from outside the European Union - a status available to any other similarly positioned service provider."

John Pluthero, Freeserve's chief executive, has already asked the government to change the tax rules, and recently met with Customs & Excise officials.

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