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(Sharecast News) - Eurotunnel has cancelled a major UK investment in response to government plans for sharp tax increases on the Channel Tunnel in a move that could push up prices of Eurostar rail tickets.
The company, which operates the tunnel, said a business rates revaluation would almost triple its payments to 65m from April. The dispute comes just ahead of next week's Budget which is expected to include targeted tax rises as Finance Minister Rachel Reeves seeks to bolster revenues.
A spokesperson for Eurotunnel told the BBC that such a hike along with other taxes, could put its total tax level at about 75% on UK earnings.
"All our investments, all our plans are becoming unsustainable. As you know, business rates, it's a property tax. And our property - the Channel Tunnel - has not changed. It's still the same tunnel, the same terminal, the same trains. Everything is equal," said chief executive Yann Leriche.
The potential 200% increase in business rates for Eurotunnel is a result of new calculations by the Valuation Office Agency (VOA), which provides the government with valuations and property advice used in setting taxation and benefits.
The firm says the cost will be pushed onto train operators through higher access charges, which are likely to be passed on to passengers. Eurostar said the plans "would be at odds with the government's ambition" to promote rail travel.
The rise will also hit rail freight. Eurotunnel said its plan to reopen Barking freight yard in east London would now be scrapped.
Eurotunnel has accused the VOA of failing to explain how it reached the new valuation.
"All of the users of the tunnel pay for access. When business rates go up, that's split amongst the different users," John Keefe, director of public and corporate affairs told the Politico website.
"At this stage, the numbers aren't one hundred percent known, because we're hoping we can talk a bit more with the government about this... But there is a mechanism whereby everybody contributes."
"It needs to be based on what business can actually pay... Because if you take all the money in business rates, there's nothing left for investment... While we're hearing leading up to the budget, 'growth, growth, growth', nobody can invest at that level."
He said the VOA's calculations were "opaque beyond belief," adding: "They say, 'here's the number.' And you go, 'why did you get the number?... And they go, 'there's the number.'"
A VOA spokesperson said it had "engaged with Getlink and their advisers on multiple occasions" and that discussions "remain ongoing". Ratepayers have the right to challenge or appeal their valuation, the body added.
Reporting by Frank Prenesti for Sharecast.com