May 25, 2006

US to repeal federal long-distance phone tax

WASHINGTON (Reuters) - The U.S. Treasury Department on
Thursday conceded a legal dispute over the federal excise tax
on long-distance telephone service and said the Internal
Revenue Service will refund tax paid on the service over the
past three years.

In a statement, U.S. Treasury Secretary John Snow also
urged Congress to repeal the excise tax on local telephone

The Justice Department will no longer pursue litigation on
the long-distance issue, the statement said.

The Treasury Department said taxpayers can claim a refund
on their 2006 returns for the long-distance tax, which was
established in 1898 as a luxury tax on wealthy Americans who
owned telephones.

Snow, at a press conference on Capitol Hill with lawmakers,
said the tax was "antiquated" and well-rid of.

"It's not often you get to kill a tax, particularly one
that goes back so far in history," Snow said, adding that
Treasury was pleased to concede this tax was no longer useful.

According to a report in The Wall Street Journal, the
decision will lead to billion of dollars in refunds to U.S.
consumers and businesses who have paid it, with refunds and
lost revenue over the next five years adding up to about $60

Snow estimated the cost of refunding taxpayers for three
years of past taxes would total about $13 billion, and said
that there would be no problem in finding that amount.

"The revenue stream is strong and can easily absorb this,"
Snow said.

In response to questions, Snow said he could not specify
how much of the refund might be made to businesses and how much
to individuals. He also said Treasury could not yet estimate
the size of refund an average individual could expect to get.

(Additional reporting by Alister Bull)