Wednesday, October 3, 2007

VAT applies to all payments to Linden Lab for European residents.

There have been some discussions lately around the VAT that European residents have to pay to Linden. I did not want to put it on my blog at first, because there were so many Second Life blogs already commenting this news. But reading some of the comments, I found it interested to put someone in the spotlight, just because of her insight on various subjects.

Veronique Kaminski, has commented some articles of mine, but now I was reading Vint Falken’s blog on this specific topic, and thought these comments should not stay in the shadow of comments, but should be a main article, knowing that she doesn’t have a blog to express herself. I hope she will forgive me…

Mostly, she was responding on another comment, but the total view of this topic, is quiet correct how we, Europeans, feel about this matter. It is certainly not an attack against Linden Lab, it is just an observation and a way of expressing how we see things from the other side of the ocean.

“I am not begging for a price reduction for Europeans here.. just saying that if LL wants to comply with the European law, they should take care about complying with ALL laws.. and state how much their service will cost us, VAT included.
One is supposed to assume that the announced price includes it.
And jurisdiction tends to protect the small ignorant consumer..(they are allowed btw to show ADDITIONALY how much it costs when you can recuperate VAT, but only in a non-confusing way… clearly stating that it is without VAT, and, e.g. not in bigger sized characters then the full price)

If the Lindens want to sell something to me, a European customer due to VAT, they must include the VAT in the price they are charging me.
But, also the product must be advertised stating the full price.I am not saying that I only want to pay 82.6. But if a seller tells me that his product costs 100, I only have to pay 100, and I only will pay 100.
The seller is responsible for deducting the VAT from the sales price and pass it to the state. It is a tax on the added value. And it aren’t the consumers who add value to the base materials.
Any company therefore includes the 21% BEFORE announcing the price to his customer.
(unless, as car salesmen sometimes tend to do for promotional reasons, the seller takes the cost of the VAT upon them..)
Now this VAT doesn’t exist since yesterday, nor since 2003.
Therefore, since LL always told that the product costed 100, and they never told that they paid the VAT for us as a promotional gift, we always HAD to assume that VAT was included. Its not up to the domestic consumer to verify this.
(its a bit like in criminal law.. your are innocent until proven the contrary)

So, coming up with this now, it leaves people here surprised.. and wondering:

*Was LL all these 4 years tax-evading? If you do that as a private person and you are caught, you get fined..

*Was LL that ignorant? Not knowing that for doing business in Europe they had to count with VAT?? Really?? an American company, the country where they know all about doing business?? Having hundreds of thousands subscribers in Europe (not all paying, I know..) I guess that, before entering a market, one does do some research, don’t you? Especially if you are offering a product where one of the basics is about commerce..

*Or is this just a way of raising the bill??

Anyway.. being in favor or not of all the VAT taxes, fact is that it isn’t a correct way to treat your customers.
Suddenly start charging some extra costs on the excuse of applying the law.. while, according to the same law, you were already charging these costs.

Now, besides the fact that this practically will mean that most EU residents will have to pay more for playing the “game”,
I wonder what the effects will be now VAT is introduced in SL.

Because, next statement at first sight sounds fine :

“Transactions in L$ between individual Residents are not subject to VAT”

and it is true, from the LL point of view. LL has nothing to do with the transactions between the residents, or between a SL shop and its customers. So it is logical LL doesn’t have to take care about the VAT issue for this transactions..

But, fully applying VAT legislation, and taking in consideration that many businesses, be it shops, rentals or even prostitution, are registered as companies and convert the Lindens back into real money.. should they (the small or big businesses) also start charging VAT to the EU customers?
Applying different prices if the dress is bought by a EU resident or a Mexican? And maintaining the bookkeeping that goes with it??
Theoretically, in that case, it will even affect the rental business of our beloved PN, who‘ll have to charge some of her customers extra in order to maintain our “socialist” systems..
Oh irony of life…”


Veronique said...

my lawyers will contact you... :-p

Looker Lumet said...


Sand Posthorn said...

Mmm... imagine ur sim owner is a european subject to tiers + VAT. They will reflect it upon their "land owners/rentors", right ? It will mean higher monthly fees for the residential plots - and what do u think designers who have their stores in such sims will do ?

However... a friend of mine paid his sim tiers - and he was debted exactly the same amount as always. Do you know what is actually happening with the daily transactions with LL ? Are they charging the usual amount + VAT or assuming it was included in the announced previous amount ?

Looker Lumet said...

I don't think everyone has to pay the VAT right now, as Linden does not have all the paperwork ready, even not the registration in Europe. And it should be included in the price, according the law.
So, I did not receive the message, and I don't pay more for my land. That is for now, the future will tell us, how Linden Lab is going to solve this in a proper way, if they even care....and how the designers etc. will react than.