Reduce VAT to raise broadband demand, says TIF

22 Feb 2006

Reduction of the VAT rate on broadband services from 21pc to just 13.5pc could stimulate flagging demand for broadband in Ireland, according to Tommy McCabe, director of IBEC body the Telecommunications and Internet Federation (TIF).

McCabe made the recommendation in response to yesterday’s telecommunications report from the European Commission which revealed that Ireland is below the EU average of 11pc on broadband penetration and is in 20th place out of 26 countries. Only 5pc of the Irish population has access to broadband.

The report also revealed that Ireland has the highest monthly line rental out of EU countries as well as the US and Japan. In terms of the composite telecoms basket — combining local, national and international calls with charges such as line rental — Ireland came in third place in the world behind US and Japan and ahead of the EU nations.

McCabe said there was a need to boost demand for broadband in this country and this needs to be addressed through a new Irish market development plan with Government and industry backing.

Among the measures proposed by McCabe were reduction of the VAT rate on broadband services from 21pc to 13.5pc and the introduction of an innovative SME broadband programme.

He also called for the introduction of an employee PC purchase programme with an innovative tax model to provide wider access to technology in the home and across society.

McCabe also called for a full review of the County and Group Broadband Scheme to ensure a more streamlined approach to broadband rollout in rural areas.

“Irish telecom operators are investing on average €600m per annum,” McCabe said. He referred to TIF’s report last week that recommended the Government and industry consider a €5bn investment in Ireland’s telecommunications infrastructure.

“The increase in competition in the telecoms market has resulted in a choice of platforms to access broadband, be it fixed line, cable, wireless or satellite. Pricing of ADSL lines are now below the European average as detailed in the Forfás report of November 2005. Issues surrounding the supply of broadband are being addressed. TIF supports the view expressed last week by Sean Dorgan of the IDA that broadband is being delivered to Irish business,” he added.

Despite this, he said, demand isn’t there and called for the Government to work closer with the telecoms industry to introduce demand-stimulation measures to boost take-up by consumers and businesses.

McCabe concluded: “The awareness by small business of the huge benefit that broadband can have on their businesses needs to be heightened. With increased demand comes increased investment.”

By John Kennedy