The Downgrade Survey

[Phil Deakins]

This is for Perrie but it was easier to quote your post than to find where he wrote what you quoted

16 wrote:

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Perrie Juran wrote:

I think that there is no question that the VAT created a disparity.  I'm puzzled that anyone would question this.  Now I do not live in a country with VAT so whether or not a person can get a refund from their taxing authority I have no idea.  If someone can get a full refund of that money, outside of the hassle of the initial out lay, then the disparity does go away 

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I'm sure it's the same in all EU countries but here in the UK, only businesses can register for VAT, and only those who are registered can claim back the VAT they paid out. A business can be a single person of course, and then it is the person (name) who is registered. So the vast majority of people (almost all) cannot register for VAT and can't get the VAT they pay out back.

Also, a registered person cannot claim back all the VAT that s/he has paid out. The only VAT that can be claimed back is that which is paid out for the actual business. So almost all of the individuals who are registered would not be able to claim back the VAT that LL collects from them.

The ones who would be able to claim it back are those whose business is actually in SL and those who manage to convince the VAT people that SL is a part of their business. E.g. an RL house renovations business could try to claim that advertising in SL is part of their business - but I don't think they'd get away with it.

So there may be a few people who can claim the VAT that LL collects back but so few that bringing the idea into this sort of discussion is pointless. The threshold where you have to be VAT registered these days is £77,000 (US$123,000) turnover. How many people in SL sell that much stuff in SL in a year? Very few indeed. And how many of the few are in the EU? Any? But those are the only ones who have to be registered for VAT and, without being registered, VAT can't be claimed back.

Of course, a business that turns over less than the threshold can register voluntarily but then they have to charge VAT to customers and they are much worse off because of that. The threshold allows smaller businesses to avoid being worse off. Very few people would register voluntarily and suffer the financial penalty. Consider an SL business that sells US$100,000 worth of stuff in SL. That's below the threshold so they don't have to be VAT registered. Suppose that the owner wants to claim the VAT that LL charges them back, and s/he registers for VAT. S/he'll be able to claim back the VAT on the cost of newly bought land, tier and premium membership BUT... s/he will have to pay 20% of that US$100,000 sales to the VAT collector. So s/he can claim the tiny back but has to pay out US20,000 in VAT. In other words, no big SL business owner in their right mind would volunarilty register for VAT.

All in all, the idea of people being able to claim the VAT back doesn't really come into this topic. There may be an odd few people who fiddle it through their RL business that has to be registered, but only an odd few.

[Phil Deakins]

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Ciaran Laval wrote:

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Perrie Juran wrote:

International Business Law is a very complex subject.  You are dealing with, among other things, trade agreements (treaties) between Nations, etc.  It is a specialization all of it's own.

For a simple example, consider

the Barbary Treaties.

You would be correct in saying that the EU would have no right to regulate HOW Linden Lab conducted business with someone here in the U.S. or with someone in another nation.  But the EU would and does have a right to stipulate terms, subject to the Trade Agreements we have with the EU, in order for a Company to transact business with a citizen of the EU.

Bottom line, it would take getting the U.S. government putting its foot down, by way of a trade agreement, to stop the EU from mandating that a company collect VAT in order to transact business in the EU.

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Sort of. Linden Lab can't be made to follow the EU directive on electronic services, but as a company who want to stay in good standing, it's in their interests to do so.

The US and Europe are good trading partners, with the exception of the odd tariff war, so the US would want their companies to comply with directives such as this one. Although the EU can't do much if Linden Lab don't comply, I'm sure there would be some sort of leaning on Linden Lab in the background were they to not comply, along with a bit of political sabre rattling.

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According to the official document pointed to in this thread, there is no EU directive on VAT for LL to "follow". There is no part of that document that says that LL should collect VAT.

Also, even if there were such a directive, I don't agree that it's in LL's interests to comply with it. What interests could there be?

[161488303349]

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Phil Deakins wrote:

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Ciaran Laval wrote:

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Perrie Juran wrote:

International Business Law is a very complex subject.  You are dealing with, among other things, trade agreements (treaties) between Nations, etc.  It is a specialization all of it's own.

For a simple example, consider

the Barbary Treaties.

You would be correct in saying that the EU would have no right to regulate HOW Linden Lab conducted business with someone here in the U.S. or with someone in another nation.  But the EU would and does have a right to stipulate terms, subject to the Trade Agreements we have with the EU, in order for a Company to transact business with a citizen of the EU.

Bottom line, it would take getting the U.S. government putting its foot down, by way of a trade agreement, to stop the EU from mandating that a company collect VAT in order to transact business in the EU.

---

Sort of. Linden Lab can't be made to follow the EU directive on electronic services, but as a company who want to stay in good standing, it's in their interests to do so.

The US and Europe are good trading partners, with the exception of the odd tariff war, so the US would want their companies to comply with directives such as this one. Although the EU can't do much if Linden Lab don't comply, I'm sure there would be some sort of leaning on Linden Lab in the background were they to not comply, along with a bit of political sabre rattling.

---

According to the official document pointed to in this thread, there is no EU directive on VAT for LL to "follow". There is no part of that document that says that LL should collect VAT.

Also, even if there were such a directive, I don't agree that it's in LL's interests to comply with it. What interests could there be?

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i just put here bc in this now big mess of a thread is as good as anywhere now (:

 

i been researching more about in UK. the webpage on the HM Customs website that i/we been referring to upto now is not the right info. that webpage is for companies involved in "distance selling"

distance selling for VAT purposes is defined as a VAT-registered company in a EU country selling to customers in another EU country. it not apply to foreign companies outside the EU

+

this the actual forreals one. about gdm time i find it (:

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageOnlineServices_ShowContent&id=HMCE_CL_001460&propertyType=document

VAT on e-Services (VOES)

"VAT On e-Services are a special Value Added Tax (VAT) scheme for non-EU businesses providing electronically supplied services to EU consumers (that is, private individuals and non-business organisations)."

+

VOES is compliant with EU VAT Directive that i linked to. the europa one. and has been in effect since 1 July 2003

so VAT has to be paid on e-services provided by a non-EU company to UK residents, according to the UK tax laws anyways

+

so while is true that a foreign company can choose to not pay the VAT then they will be in breach of UK laws when they dont

i dont think linden is ever going to choose to be in breach

[Phil Deakins]

Again we are back to the absolute fact that no country, or group of countries like the EU, can make rules/laws/directives that people and businesses in other countries, that have no business presence in the law-making country, have to abide by. No amount of EU documents can get around that simple fact, and therefore LL does it voluntarily. If there is a trade agreement, then the company is subject to the rules/laws about that in its own country.

[Phil Deakins]

Sorry 16, but the very first paragraph on that document states:-

"VAT On e-Services are a special Value Added Tax (VAT) scheme for non-EU businesses providing electronically supplied services to EU consumers (that is, private individuals and non-business organisations). The scheme provides an optional, simplified means of registering and accounting electronically for EU VAT with effect from 1 July 2003. To prevent the need for such non-EU businesses registering in every EU member state where they supply customers, this special scheme allows them to register and account for EU VAT in a single EU Member State of their choice."

The page is not about a law or rule. It's about a way for foreign businesses to register for VAT to cover the whole of the EU instead of registering in each EU country. It says nothing about a requirement for foreign businesses to register.

[161488303349]

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Phil Deakins wrote:

Again we are back to the absolute fact that no country, or group of countries like the EU, can make rules/laws/directives that people and businesses in other countries, that have no business presence in the law-making country, have to abide by. No amount of EU documents can get around that simple fact, and therefore LL does it voluntarily. If there is a trade agreement, then the company is subject to the rules/laws about that in its own country.

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at least we can know now what is the legal/judicial facts. the relevant fact is that the e-service is received by a UK resident.

is enough all by irself to satisfy the legal/judicial requirements of the UK law courts

foreign companies incl. linden, have to weigh this up when they want to do business in the UK

+

is not a absolute fact that UK/EU cant do this kinda thing. is only a convention  between sovereign nations. but conventions change. they always have as the circumstances/situations change

 

 

 

[161488303349]

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Phil Deakins wrote:

Sorry 16, but the very first paragraph on that document states:-

"VAT On e-Services are a special Value Added Tax (VAT) scheme for

non-EU businesses

providing electronically supplied services to EU consumers (that is, private individuals and non-business organisations). The scheme provides an optional, simplified means of registering and accounting electronically for EU VAT with effect from 1 July 2003. To prevent the need for such non-EU businesses registering in every EU member state where they supply customers, this special scheme allows them to register and account for EU VAT in a single EU Member State of their choice."

The page is not about a law or rule. It's about a way for foreign businesses to register for VAT to cover the whole of the EU instead of registering in each EU country. It says nothing about a requirement for foreign businesses to register.

---

you have to go back to the EU VAT Directive to see the requirement. i forget the number now but is in my other post

if want whole more background on it can go here

http://www.official-documents.gov.uk/document/hc0506/hc10/1051/1051.pdf

is the official UK National Audit Office audit on HM Customs and e-service VAT etc. Part 4 explains it for non-EU companies

 

[Solar Legion]

To sum all of ths up for those catching up: Yes, Linden Lab is required to collect VAT. No - saying over and over again that it is a choice does not make such an opinion the truth ...

And quite frankly the idea that a country cannot force other countries to abide by their own laws/rules went out the window the first time the US (and any other UN country) invaded any other country over Human Rights violatilons ... Oh, and lets not forget the recent actions over the last decade where copyright is concerned (spurred on by RIAA/MPAA).

Bottom line: LL collects VAT - end of story.

[Phil Deakins]

Your bottom line is correct, but your fist paragraph is rubbish. LL is not required by any law that they have to abide by to collect VAT. They choose to do it. That's the "end of story".

[Phil Deakins]

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16 wrote:

you have to go back to the EU VAT Directive to see the requirement. i forget the number now but is in my other post

if want whole more background on it can go here

http://www.official-documents.gov.uk/document/hc0506/hc10/1051/1051.pdf

is the official UK National Audit Office audit on HM Customs and e-service VAT etc. Part 4 explains it for non-EU companies 

---

It's not necessary to go through it. The fact that no country can make a law that people in other countries have to abide by, unless the other country makes a law to make their citizens abide by it, is self-evident. There's nothing more.

[Coby Foden]

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Solar Legion wrote:

To sum all of ths up for those catching up: Yes, Linden Lab is required to collect VAT. No - saying over and over again that it is a choice does not make such an opinion the truth ...

Bottom line: LL collects VAT - end of story.

---

I tend to agree after reading this:

http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/e-services/article_1610_en.htm

For the non-EU supplier whose EU customers are non-business individuals or organisations, there will now be an obligation to charge and account for VAT on these sales just as EU suppliers have to do.

...

... the changes that the new Directive will introduce will bring the EU VAT system into line with agreed OECD principles on taxation of e-commerce and rectify a fundamental competitive inequity that today operates to the detriment of European based e-business.

The OECD principles on the taxation of e-commerce were agreed at a 1998 conference in Ottawa. These principles establish that the rules for consumption taxes (such as VAT) should result in taxation in the jurisdiction where consumption takes place. The OECD also agreed that a simplified online registration scheme, as now adopted by the Council, is the only viable option today for applying taxes to e-commerce sales by non-resident traders to private consumers (so-called B2C). This is exactly what is now being implemented in the EU - initially for a three-year period which can then be renewed or refined as developments dictate.

...

• Won't the Directive be difficult, if not impossible, to implement?

 

This view is at odds with conclusions currently being reached by OECD countries in a process that includes substantial business involvement. It can only be seen as representing the position of a business sector that is fundamentally "anti-tax" and simply does not want to see VAT imposed on e-commerce in any shape or form.

 

The VAT system is based on voluntary compliance and this tradition will continue. The reality is that legitimate business will want to operate within the law and satisfy audit obligations to ensure that their commercial rights are respected. Legitimate operators certainly do not want to give credence to the idea that Internet is a zone where laws do not apply - the role of voluntary compliance should not therefore be underestimated.

[uNQUOTE]

The idea of the VAT is to put businesses (EU and non-EU) in the same competetive line. Not giving advantage to neither. Example: Two companies 1. EU company 2. Non EU company. Both sell similar electronic services. It would not be fair if the non EU company could sell their product without VAT to customers whereas the EU company would have to add the VAT to their prices.

Concerning Second Life: I see this as a special case, because the residents create content inside it.  It is global.  Now those who live in EU are in disadvantage compared to other residents. If EU resident buys region in SL, establishes shop to sell products they have higher cost doing it than non EU residents do. This is in contradiction with EU VAT taxation principle [to put all in the same competetive line]. Therefore, in my mind EU should make Second Life exempt from the VAT.

[Perrie Juran]

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Phil Deakins wrote:

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16 wrote:

you have to go back to the EU VAT Directive to see the requirement. i forget the number now but is in my other post

if want whole more background on it can go here

http://www.official-documents.gov.uk/document/hc0506/hc10/1051/1051.pdf

is the official UK National Audit Office audit on HM Customs and e-service VAT etc. Part 4 explains it for non-EU companies 

---

It's not necessary to go through it. The fact that no country can make a law that people in other countries have to abide by, unless the other country makes a law to make their citizens abide by it, is self-evident. There's nothing more.

---

I think at this point we are really begin to go around in Circles.  There can be so many twists and turns to doing business Internationally.  So I asked myself, what other MMO's collect VAT and Googled it and in the top results Steam popped up.

Steam is owned by Valve, a U.S. corporation.  http://en.wikipedia.org/wiki/Valve_Corporation

From Valve website:  "If your use of Steam is subject to any type of use or sales tax, then Valve may also charge you for those taxes, in addition to the Subscription or other fees published in the Rules of Use. The European Union VAT (“VAT”) tax amounts collected by Valve reflect VAT due on the value of any Software or Subscription."  http://store.steampowered.com/subscriber_agreement/

Now Valve did set up an EU Subsidiarry but it is still a U.S. owned Subsidiary.  "If you are a Subscriber whose primary residence is in one of the member countries of the European Union (an “EU Subscriber”), your Subscriber relationship is with, and any purchases you make are being made from, Valve S.a.r.l. (“Valve EU”)."

My guess would be it was done to deal with the complications of doing business in the E.U.

Star Wars Online also collects VAT:  http://www.swtor.com/community/showthread.php?t=251898

One thing in all this that I think makes this a moot discussion is this:  If Linden Lab did not collect the VAT, th end users in the E.U. would still be responsible to declare and pay the VAT themselves. 

 

 

[Solar Legion]

Phil - I've already said it once: Repeating your opinion on the matter doesn't change reality. You've been shown by others already that they are required by some of the EU countries their customers are in to collect VAT. That's the reality and nothing's going to change it.

If no other countries had to abide by the laws of any other country .... The US could not enforce its copyright laws anywhere else nor could we use "Human Rights" as a reason for military action anywhere in the world.

Sorry, that's the real world for you.

[Solar Legion]

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Coby Foden wrote:

---

Solar Legion wrote:

To sum all of ths up for those catching up: Yes, Linden Lab is required to collect VAT. No - saying over and over again that it is a choice does not make such an opinion the truth ...

Bottom line: LL collects VAT - end of story.

---

I tend to agree after reading this:

http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/e-services/article_1610_en.htm

For the non-EU supplier whose EU customers are non-business individuals or organisations, there will now be an obligation to charge and account for VAT on these sales just as EU suppliers have to do.

...

... the changes that the new Directive will introduce will bring the EU VAT system into line with agreed OECD principles on taxation of e-commerce and rectify a fundamental competitive inequity that today operates to the detriment of European based e-business.

The OECD principles on the taxation of e-commerce were agreed at a 1998 conference in Ottawa. These principles establish that the rules for consumption taxes (such as VAT) should result in taxation in the jurisdiction where consumption takes place. The OECD also agreed that a simplified online registration scheme, as now adopted by the Council, is the only viable option today for applying taxes to e-commerce sales by non-resident traders to private consumers (so-called B2C). This is exactly what is now being implemented in the EU - initially for a three-year period which can then be renewed or refined as developments dictate.

...

• Won't the Directive be difficult, if not impossible, to implement?

 

This view is at odds with conclusions currently being reached by OECD countries in a process that includes substantial business involvement. It can only be seen as representing the position of a business sector that is fundamentally "anti-tax" and simply does not want to see VAT imposed on e-commerce in any shape or form.

 

The VAT system is based on voluntary compliance and this tradition will continue. The reality is that legitimate business will want to operate within the law and satisfy audit obligations to ensure that their commercial rights are respected. Legitimate operators certainly do not want to give credence to the idea that Internet is a zone where laws do not apply - the role of voluntary compliance should not therefore be underestimated.

[uNQUOTE]

The idea of the VAT is to put businesses (EU and non-EU) in the same competetive line. Not giving advantage to neither. Example: Two companies 1. EU company 2. Non EU company. Both sell similar electronic services. It would not be fair if the non EU company could sell their product without VAT to customers whereas the EU company would have to add the VAT to their prices.

Concerning Second Life: I see this as a special case, because the residents create content inside it.  It is global.  Now those who live in EU are in disadvantage compared to other residents. If EU resident buys region in SL, establishes shop to sell products they have higher cost doing it than non EU residents do. This is in contradiction with EU VAT taxation principle [to put all in the same competetive line]. Therefore, in my mind EU should make Second Life exempt from the VAT.

---

Indeed. A simplified way of explaining it to anyone that still thinks Linden Lab actually has a choice in the matter could also be used ...

Now granted, this is a personal example but the general principle holds true on an international scale - I have an account with Blizzard and pay for a WoW subscription. I live in a state that does not charge sales tax for digital content/subscriptions but the state my bank is in, does. Instead of paying the 14.99 for a standard monthly subscription ... I pay 16.04. My place of residence doesn't matter - it's where my bank is located that determines this.

The same holds true for international business/imports or all goods - with few exceptions (and a few more complexities thrown in for good measure).

[Perrie Juran]

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Solar Legion wrote:

---

Coby Foden wrote:

---

Solar Legion wrote:

To sum all of ths up for those catching up: Yes, Linden Lab is required to collect VAT. No - saying over and over again that it is a choice does not make such an opinion the truth ...

Bottom line: LL collects VAT - end of story.

---

I tend to agree after reading this:

http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/e-services/article_1610_en.htm

For the non-EU supplier whose EU customers are non-business individuals or organisations, there will now be an obligation to charge and account for VAT on these sales just as EU suppliers have to do.

...

... the changes that the new Directive will introduce will bring the EU VAT system into line with agreed OECD principles on taxation of e-commerce and rectify a fundamental competitive inequity that today operates to the detriment of European based e-business.

The OECD principles on the taxation of e-commerce were agreed at a 1998 conference in Ottawa.

---

And the United States is a OECD Nation:  http://en.wikipedia.org/wiki/Organisation_for_Economic_Co-operation_and_Development#Current_members

 

[Deltango Vale]

@ everyone

Hundreds of pages of tightly-argued legal definitions are a distraction from the real issue. The real issue is what Linden Lab chose to do about it.

Linden Lab claimed it had to pay VAT (probably true). Now let's move on.

I have argued consistently that Linden Lab made a strategic error by changing its policy on how to deal with VAT. At first, Linden Lab treated VAT as an internationally pooled 'Cost of Goods Sold' (like electricity, wages, office rent, ISP charges, etc., which vary from country to country). This, in my opinion was a sensible approach because it generated sales, which would more than offset the cost of VAT.

Linden Lab stated clearly that it changed its policy in order to cut costs:

"We have been asked quite a bit why we haven’t charged VAT before now. The simple answer is that Linden Lab was able to absorb the cost of VAT on behalf of its EU customers. Our business in Europe has quadrupled each year since 2004 and already it has more than quadrupled in 2007 through September. As a result, we can no longer afford to absorb these costs for European Residents."

This decision, in my opinion, was shortsighted and counterproductive. I believe Linden Lab turned cheapskate, which killed SL's long-term growth potential in Europe, which killed the expanding revenue stream, which, in the end, cost more in lost profit than the cost of VAT. Every RL investor in Linden Lab and every resident in every country paid for that mistake.

For those who want all the quotes, the links and the math, see COGS in the VAT Machine

[161488303349]

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Deltango Vale wrote:

@ everyone

Hundreds of pages of tightly-argued legal definitions are a distraction from the real issue. The real issue is what Linden Lab chose to do about it.

Linden Lab claimed it had to pay VAT (probably true). Now let's move on.

I have argued consistently that Linden Lab made a strategic error by

changing its policy

on how to deal with VAT. At first, Linden Lab treated VAT as an internationally pooled 'Cost of Goods Sold' (like electricity, wages, office rent, ISP charges, etc., which vary from country to country). This, in my opinion was a sensible approach because it generated sales, which would more than offset the cost of VAT.

Linden Lab stated clearly that it changed its policy in order to cut costs:

"We have been asked quite a bit why we haven’t charged VAT before now. The simple answer is that Linden Lab was able to absorb the cost of VAT on behalf of its EU customers. Our business in Europe has quadrupled each year since 2004 and already it has more than quadrupled in 2007 through September. As a result, we can no longer afford to absorb these costs for European Residents."

This decision, in my opinion, was shortsighted and counterproductive. I believe Linden Lab turned cheapskate, which killed SL's long-term growth potential in Europe, which killed the expanding revenue stream, which, in the end,

cost more in lost profit than the cost of VAT

. Every RL investor in Linden Lab and every resident in every country paid for that mistake.

For those who want all the quotes, the links and the math, see

COGS in the VAT Machine

---

our chat went down that way mostly bc i wanted to know why linden was collecting VAT off its EU customers and giving it the EU taxman. so end up find out eventually. so that parts ok. ok meaning that now i know why

+

so back to your point (:

linden had 2 pricing sim schedules. one for EU customers and one for everyone else. am just use about 20% for this example. bc the actual price/rate dont matter. if we are discussing the principle of the argument

for EU: : $250 + VAT ($50 about)

for else: $295

linden had 3 options

1) leave the pricing schedule as it was

2) reduce the tier for else down to $250

3) increase the EU price to $295 + VAT

they obvious decide it not going to be option 1)

so choose 2 or 3. and they choose 3

+

had it been up to us purely as customers then we pretty much universal agree, being bargain hunters, that option 2) would be personal good for us. even lower. at least inside our own pocket

is some of us think that if they was the owners then they would option to reduce the else price schedule bc they convinced that reducing prices automatic leads to more profits bc it grows sales. or at least maintains the level of sales

this sometimes called spreadsheet economics btw. bc it not factor in other important variables like quality of product and service

+

the argument that how linden handle VAT, or any of their other taxes even, total muddy up things really. it actual distracts big time from the core argument

if set aside the whole business/political/legals/fairness rationales then can see that in these kinds of arguments is the size of the VAT impost that cause all the angst

like

20% = $50

99% = $292

1%  = $3

if VAT was 1% then nobody much care and we not even be having this debate

if was 99% then linden cant obvious swallow that

so what is the %number they can swallow?  dunno. linden decide it wasnt 20% based on their then volumes of EU business

if 20% is to high an impost then EU customers should petition their goverments to reduce, or even exempt e-services from VAT. is political action needed in the EU if real change is to be made

+

edit: for posterity i change from 235+60 to 250+50 which is more correctish. my excuse is i ran out of fingers (:

[161488303349]

yes. thats pretty much how it works here as well. the threshold here is $30,000 (about?)

you dont have to a registered company to be GST-registered. can just trade on your name if you want. actually most self-employed do that way anyways

bc the cost in time to do all the compliances is not worth it. also if you do have a small registered company and try get a loan from the bank to expand your business then they say they want a personal gurantee on the loan anyways. so not worth bother either for that reason

+

where gets bad i think is when people try get clever. bc you can claim back GST on capital items as well as services

so can set up a company, get a GST register for the company so that you not personal liable. buy some new computers and softwares. hang out a sign saying buy my awesome e-services. then file your return. get the GST back off the tax dept. then liquidate the company. bc your excuse is you not made any money and so is unprofitable to continue, even tho you done heaps of spreadsheets that say you going to make zillions

when liquidate then sell the computers back to yourself personally at knockdown price (bc they now secondhand) and score. the cunning part about that is can show that the company made a loss ans so is no income tax to pay. and as part of the liquidation can legal return the secondhand sales money back tot he shareholders. which just happens to be you.

this another reason why i dont like taxes like VAT/GST etc. the cost to the tax dept (and lower revenues to the State) is quite high just try to chase down these kinda people

+

is another point in all the many points.

am pretty sure you was make a general point at one time. the point that is not the business of anyone to have to be a tax collector for the State. not sure if you did. but even if you didnt then i am agree anyway (: 

is what VAT/GST/sales tax registered businesses are. like tax collectors

the business dont actually pay the tax money themselves. is a tax that their customers pay. but the State makes the business collect it for them. i think thats wrong in principle. the State should collect its own taxes and concentrate on getting it off me direct. and not waste heaps and heaps of money enforcing you (like your business) to get it off me for them

 

[Deltango Vale]

Yes, an alternative might have been to raise the group tier bonus for EU mainland owners from 10% to 30%. This might have also helped to mop up some of the oversupply of mainland. As for estate owners, gods, I can't think of anything to have helped them except a price reduction back to parity. A lot of single islands were used solely for recreation. The UK price for them jumped from US$295 to US$351. The French price jumped to US$369. They didn't sign up for that. As for mom and pop businesses on islands, that extra US$50-70 probably wiped out all their profits.

And how does one monetize psychology? If you find a dead fly in your soup or discover the bathroom is filthy, will you return to that restaurant? What do you tell your friends? Word gets around fast.

[161488303349]

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Perrie Juran wrote:

One thing in all this that I think makes this a moot discussion is this:  If Linden Lab did not collect the VAT, th end users in the E.U. would still be responsible to declare and pay the VAT themselves. 

---

(:

is maybe not true this. not legally anyways. to be a VAT tax collector (even off yourself) then you have to be VAT-registered. is no legal requirement for a private citizen to register for VAT (assume they not trading on their account and over the threshold)

if you not registered than you cant file a VAT return. even if you wanted to. and even if you did send the money to the tax deptt, as a non-registered VAT, then bc is no legal paperwork (as prescribed by law)  then the tax dept would have to treat it as a tax overpayment and give it back to you

i think you can keep refuse it like not cash the cheque say. but if so i think it end up in the unclaimed money bin where it just sits forever until your ancestors file a claim to get it

 

[Amethyst Jetaime]

Sorry still don't buy your argument.  Again there is an interest of fairness and treatment of all customers equally.  If they are going to subsidize one group of customers due to taxes imposed on them by those customers' government, it would only be fair that they subsidize everyone's tiers for tax reasons or lower their tiers by an amount equal to the subsidy.  It is quite common that an item sells for different amounts in different countries based on the expenses associated with doing business in that country, including taxes.

But lets put aside the fairness issue and look at a common economic fact when it comes to business that no one has brought up yet.

All companies have expenses associated with doing business. It really doesn't make a difference if the expense is a tax or the monthly electric bill.  All expenses are taken into account when the company sets the price for an item they sell.  If expenses go up, eventually so do the prices of their items or the price stays the same and the quantity sold for a given price goes down.  This is a fact of life now days and happens every day.  A trip to the supermarket shows this is common practice.

If LL continued to absorb the VAT rather than start charging for it, it would have led to a tier increase across the board.  So the fact that some customers tiers were being subsidized would have eventually meant that tiers for everyone, including non Europeans who are the majority of customers, would have increased and that in turn would have led to an even larger land dump than what occurred when LL decided not to subsidize Europeans anymore. Those people that decided to keep their land would in effect be helping to pay for a tax they are not responsible for paying and which they derive no benefit.

Your argument supposes that this wouldn't happen but it was pointed out that LL didn't want the expense anymore.  So I couldn't see them continuing to absorb the tax and take a loss of 20 percent of the cost of a sim, a significant amount, before they did raise tiers for everyone. I am also pretty certain that a larger land dump would have occured.  If you recall, there was a massive land dump grid wide when they raised homestead tiers from 95US to 125US.

Therefore in light of this, surprisingly, LL made the correct decision in this particular case in my opinion.  Yes they lost some sales to Europeans but they would have lost far more if they had raised the tier for everyone.

 

[Phil Deakins]

This isn't a reply to you, Amethyst. It's just a general reply.

I don't understand how some people here can actually believe that one country can make rules and laws that people in other countries must abide by, when the people in the other countries don't operate in the law-making country. How anyone could actually believe that is completely beyond my comprehension but clearly some people do believe it. Incredible.

Someone said that continually repeating it doesn't make it real. But I haven't tried to make it real. It's been real from the start. Repeating it is simply trying to get some people here to understand. It's perfectly simple, but some people prefer to believe that the Britain can make laws that U.S. citizens, living in their own country and having nothing to do with Britain, have to comply with. All I can say is that you believe what you want. It doesn't change the facts or reality. It doesn't change anything at all.

 

[Phil Deakins]

My replies are in blue.

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16 wrote:

yes. thats pretty much how it works here as well. the threshold here is $30,000 (about?)

you dont have to a registered company to be GST-registered. can just trade on your name if you want. actually most self-employed do that way anyways

It's the same here. It's why I often use the word "business" instead of "company".  Here a company has limited liability and is an entity in its own right - very different to a business. It sounds like it's the same where you are.

am pretty sure you was make a general point at one time. the point that is not the business of anyone to have to be a tax collector for the State. not sure if you did. but even if you didnt then i am agree anyway (: 

is what VAT/GST/sales tax registered businesses are. like tax collectors

the business dont actually pay the tax money themselves. is a tax that their customers pay. but the State makes the business collect it for them. i think thats wrong in principle. the State should collect its own taxes and concentrate on getting it off me direct. and not waste heaps and heaps of money enforcing you (like your business) to get it off me for them

There was a huge outcry for exactly that reason when VAT was first introduced here. Businesses did not accept being tax collectors. But it didn't change anything. A bad aspect of the new system was highlighted in a popular soap here (Coronation Street). A one-man business invoiced a customer and charged VAT. The customer didn't pay straight away but the business man had to pay the VAT to the government. He couldn't do it because he hadn't been paid by the customer.

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I did come up with a nice little workaround a very long time ago when I was VAT registered, that involved my wife who wasn't VAT registered. I owned the stock so I claimed back the VAT I paid on it. Then I rented the stock to my wife and I delivered the stock the the end users on her behalf. In that way, I, as the wholesaler, claimed back the VAT I paid out, and I charged my wife, the retailer, a nominal amount to rent the stock. I had to charge her VAT of course, but it was tiny. Then my wife, the retailer, who was not VAT registered, rented it out to the consumers and couldn't charge VAT so all the money received was kept. And I was the delivery boy.

In practise, only I was involved. The wholesale and retail aspects, and who owned and who rented the stock, was only on paper. I don't think she even understood it. It was all above board too. The VAT collector at the time liked idea and cleared me to do it. He was a person who liked legal workarounds.

Anyway, that's just a little aside from the thread's topic - as is this whole VAT discussion

[161488303349]

about the Coronation story

+

here is 2 ways that you can choose

1) invoice based - tax payments/credits are accounted for and paid  on the date invoices/bills are created/received. (this sounds like what happened in the story)

2) payments based - tax payments/credits are accounted for and paid when the money actual change hands. most here i think use this option bc is safer

+

i think is some big companies use invoice based. dont know the details but it have something to do with the imbalance in how many invoices they issue and how many bills they get. and when they fall due. something like that

[Phil Deakins]

@everyone. On the disparity between the costs of EU customers and everyone else.

As an EU customer, I don't think that LL did it wrong at the time they started to make EU customers pay VAT. They had to collect VAT from me because they operated within the EU at the time. Because of the law, they had to choose to receive less from EU customers or EU customers had to pay more. Even if the cost of the VAT was split between LL and the customer, it would still more or less amount to the same choices. There could not be parity.

So the question was, why should the company receive less from each EU customer than from everyone else? It may seem a hard point of view but I don't think the question, why should EU customers have to pay more than everyone else?, arises because, if I want to use a system, I simply have to pay what it costs for me to use it. I'm sure that LL did their sums at the time and decided that, although some EU people would stop paying anything, the company would be better off if EU people paid the VAT. I find no reaon to argue against that.

It did mean that the way that EU people can use SL became slightly different to the way others can use it, but that's all. It means that EU people pay more for land than other people and that's all it means. It could price landlords who don't have many tenants out of the market. It wouldn't price those with a large number of tenants out of the market - it would just mean they make less profit, and that's not a good enough reason for LL to make less money by swallowing the VAT, imo. But those who can't compete in the landlord market can still compete in all other markets, not many of which require land ownership. For businesses that require land, renting was a way of having it without paying VAT - and still is.

Most SL businesses run close to the edge. They make anywhere from a loss to a small profit, so to suddenly have VAT added to the costs would certainly have caused some to close down at the time. But I don't see that as a reason why LL should swallow all the VAT. There are still plenty of ways to enjoy SL by running a business in it, including needing land for it, that EU people can do perfectly well, and compete perfectly well with non-EU people.

I may be swimming against the tide of EU users' overall opinion but I'm an EU user and it really is my opinion.

One more thing. I've seen it written many times that U.S. people pay taxes in other ways, so why should LL pay EU people's taxes for them. I think the idea is that U.S. people pay purchase tax (I've seen that written in the forum). But, as far as I know, they don't pay purchase tax for the services provided by LL. I would be interested to hear of any taxes that U.S. customers pay that tends to balance the VAT that LL collects from EU people.