Linden Lab Finally Posts On VAT

In Questions About VAT?, Robin Linden finally wrote something about the VAT surprise EU users got served up. The excuse for a lack of blog post this time was:

...We individually contacted residents who would be affected by the tax and so did not initally do a blog post believing a general announcement could be confusing for those Second Life Residents not impacted...

Well, actually, I think simply titling an entry 'EU Users Only' should be sufficient. Granted, some people have low reading comprehension, but I think a clearly titled post would have helped. Its better than "Oops! You have VAT!".

But the fact that Linden Lab actually posted something is noteworthy, but the reason I'm posting this is because some of the comments are really worth reading. Here are a few:

• Gomez Bracken:
  

  Without wishing to start a flame on the subject, can you tell us EU customers why we are still paying the same base (ex-vat) price as US residents? I’m assuming that now you are charging us VAT, you should not be charging us state of claifornia sales taxes (7.25%) also? As it stands, we are being charged VAT on the ex-vat price AND us state tax…

• Melanie Milland:
  

  I pay my tier with US dollars gained from the sale of L$. This money has never been anywhere near the UK, it has not been earned in the UK, not been paid to me in the UK and is not spent in the UK.
  VAT should not be charged in this case…

• Vanessa:
  

  Robin: In the “interview” with Prok you stated that LL has been absorbing the VAT all along, which in my opinion has to mean that account fees and tier fees were *ALWAYS* VAT inclusive like any EU citizen would expect.

  That obviously means that you’re not just adding VAT to current fees, you’re simply executing a country-specific price hike that only affects EU citizens, under the guise of being forced to comply with EU law.

  It would be helpful to clarify whether LL didn’t realize it needed to pass on VAT for EU members until recently (quite unbelievable, but a possibility I guess) or be upfront that this is really just a targetted price increase.

  Nothing in the post really answers the question as to why there was no advance notification either. A simple “after reviewing our pricing for EU citizens we’ve made the painful decision to raise our prices to offset the VAT we’re required to pay - and have been absorbing up until now - to the EU member state you reside in” would have gone a LONG way to informing residents and would be met with understanding and you could have posted that weeks or months ago.

  I take anything Prok posts with a canister of salt, but if it is true that Linden Lab was absorbing VAT before...

• Kerunix Flan:
  

  VAT was supposed to be included in the tier fee. because there is no mention of VAT being excluded so, by default (by law), vat was included in the tier fee. LL have to support it.

• Alf Lednev:
  

  Robimn Linden wrote “We consulted with a number of highly-qualified tax advisors, and the bottom line is that we must charge VAT to EU residents in order to comply with EU tax regulations

  So SL EU residents will be forced to abide by EU Tax laws but NOT by allowed the proections offered by EU Privacy laws?

  Since it is sprouted ad nausem that SL is US based and everyone MUST obey US Law, Why suddenly is SL saying EU residents must pay EU taxes on tiers etc. The amounts are small and the servers are in the US, so aren’t they bound by US Laws as repeatedly told about everything else?

  Selective application of different international laws are to be the norm? If it’s money, SL laws seem to be to grab all that can be got ( I am sure Lindens will be playing the short term money market with the EU Vat taxes before handing them over to the EU) . If its not money related, bleat US servers/US laws on privacy.

  So EU Tax laws must be met but EU privacy laws pertaining to residents will not be as US Law overides? Uh huh selective application of international laws is a minefield that Lindens have just started tap dancing in. Roll on Hipihi as SL fades slowly into the morass of the courts.

I'm no tax law expert, but I do believe that people are right when they say that the price was not advertised as excluding VAT, and is therefore questionably legal. That seems to be pretty much the way that VAT pricing works.

If Robin Linden really did say that 'Linden Lab has been absorbing the VAT', she would be right. If Linden Lab has to pay the VAT - and by EU tax laws related to Electronically Supplied Services, it would have to - then Linden Lab has been absorbing the costs. They apparently did not know until they consulted with their tax folks - but then, that would have been an opportune time to warn EU residents.

The whole situation really stinks, and it will affect the Second Life economy. EU folk are not in small numbers, and they spend money... that they have to spend more may be a part of EU law, but the result is that they are likely to spend less. Some have even said that they are not spending any more. Who can blame them?

This most certainly could have been handled better. The point of EU law being used only partially is a good one, especially if EU users have to pay VAT. If I were in the EU, I'd probably hold out for a more equal playing ground...