LL is committing fraud with recent VAT move

Sums it up pretty well, I think.

If in the EU we purchase hosting from another EU country, we would expect to pay VAT at that countries rate, yes.

However, I (in the UK) can purchase web hosting from a US company and NOT pay VAT.

Gomez

A little further information too....

There was a high profile court case a couple of years ago when UK ISP Freeserve (now owned by Orange) took AOL to the High Court becuase it was not charging VAT to it's UK users. Details

http://www.theregister.co.uk/2003/11/03/freeserve_loses_aol_vat_case/

A summary of the outcome was:

"The High Court has confirmed that Customs & Excise followed the correct procedure in coming to its original decision to make any information providers with their hubs outside the EU exempt from VAT. AOL has always abided by the relevant legislation on VAT and will continue to do so."

Gomez

Hello,

the thingy is this:
- If there is no mention of 'VAT not included' it is considered included

and as I am not a businessowner in RL, I am not to pay 'Nettoprices'. So if the is the law, I would have been breaking it for almost a year now.
If you are an 'end-customer' it is like this:
'Die Preise sind einschließlich der Umsatzsteuer sowie aller sonstigen Abgaben und Zuschläge auszuzeichnen (Bruttopreise)'

Which means:
'Prices have to be including VAT and including all other taxes or additions '

Now that is that for Germany. It is called the 'PrAG', 'Preisauszeichnungsgesetz'. I am normally very supportive of LL, but guys, this is a thing that I will bring up if there is somebody coming and asking why I did not pay VAT for almost a year for this service.

Gomez: Bear in mind that the Freeserve/AOL case was already underway before the EU's VAT Directive was implemented (July 2003), so the outcome is unlikely to have been affected by it.

It's worth noting that the UK was against the VAT Directive, and supported the US's stance that tax should be abolished on digitised sales altogether. Unfortunately we are just one of twenty-seven member states, and our votes aren't always on the winning side.

Any British Citizen wanting to get this Directive abolished is free to very easily petition the Prime Minister at:

http://petitions.pm.gov.uk/EU-INTERNET/

200 signatures guarantees a government response.
A few thousand is likely to see a personal reply from the PM.

If you read the whole of the story you link to you will see:

n a statement Freeserve said: "We are disappointed with the verdict but we are pleased that since 1 July 2003 AOL is in line with all other ISPs and has been paying VAT so that the level playing field we fought long and hard for has been achieved."

The law changed, and information services provided from outside the EU are now covered by VAT.

Great link Walker - adding to my profile and anywhere else I can

No, it's a tax.

Yes, but that's why we use American companies for webhosting instead.

I read his article. It just appears to be garbage without any underlying message between.

Quite. I think they're likely to come after them for procedural issues though, unless they suck up the VAT for the present billing period. Not sure about the rest of the EU or even the US, but a consumer doesn't even have to get involved in legal action if they're the victim of VAT irregularity here in the UK.

One telephone call to Consumer Direct will set the wheels in motion, getting Trading Standards and possibly the Inland Revenue involved.
I suspect they'll go easy on LL, not being familiar with our quaint taxation laws, and assist them in getting their house in order.

That's not a bad idea! I think I'll drop it in my sig. =)

You do know how many of these petitions have led to the Government changing policy or introducing new legislation don't you?

Doing something is a whole lot better than doing nothing. The e-petitioning system isn't even out of its beta period yet, but it's already attracted enormous amounts of publicity, and made it difficult for the government to sidestep particular issues in the past.

For example, The Telegraph's petition for an EU referendum has put the Prime Minister under enormous pressure with more than 100,000 people signing so far, and it's not even closed yet.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/09/27/neu127.xml

As the situation stands, the UK didn't support the EU's 2003 VAT Directive anyway, so this petition is hardly going to result in a policy change, but at least it makes feeling known and has the potential to shape future parliamentary discussion on the subject.

All good points, but my guess is that LL simply goofed here. We don't price that way in the US, and LL clearly just followed its American convention in pricing -- remmeber, you're dealing with a small start up in San Francisco staffed pretty much exclusively with software engineers -- they don't know anything about the PrAG, I'm certain, and this has only come up as a result of a compliance review they started after the whole ageplay scandal came up. Clearly their prior practice doesn't comply with EU rules on pricing and VAT, but I see that as a goof, and probably one to be expected from a company of LL's size and type. I think you can rest assured that, as a practical matter, LL has *not* been collecting VAT from you previously and remitting it to any EU government -- the prices have been tax free so far to you.

So what if they goofed? It's still illegal to bill you for something before informing you of it, and I'm pretty sure they are obliged to give a full billing period of notice. What LL is doing is quite simply, illegal under EU law (charging the tax for any time before one full billing period of notice).

Yes, they goofed, and it's probably based on lack of cultural knowledge as much as anything else. it's still illegal. Do you think LL wouldn't come down hard on our ass if they caught us doing something illegal that they didn't like? LL are a service provider, not your best buddy. It's time we started treating them like one.

Yes, I agree but you're talking about two months -- if that is the extent of your beef with this, then bring it to the attention of your consumer protection authorities and see what you can get out of that.

Ohhh Im pretty sure they will let it slide more than you think.

Becuase they have decided on a policy thats really impossible to improse - expecting people in countries other than theirs to collect taxes for them. I think they will be a bit lenient when countries actually begin to comply with this crazy idea.

When 9/10 companies that are supposed to collect the tax are not - and one says it will ...

See what I mean?

They are not going to expect an American start up to know their rules right away.

The most you will accomplish by doing so is costing LL a ton of money. They are not suddenly going to be able to say "you are right we will pay everyone's VAT out of our pocklet."

----------------------

I understand people being upset over lack of notice - but its unrealisitic to think Europeans will get a 15-20% cost discount in order to pay their VAT

Maybe for the first month of course - but long term is they will have to pay it.

-----------------------

If LL has to pay the Euro's BACKDATED VATs well then Ill tell you what will happen -

EVERYONES prices will be going up. And Europeans will go up MORE. becuase Linden Lab will have to take out a big loan to pay all that money.

---------------------------

The argument ove VAT included in the price is semantics - we only include Taxes in the US that way on Gas, Liquor and Cigarettes. LL could legitimately plead ignorance there.

Oh I agree that the Directive is impossible to enforce for the most part, but only until a company establishes a presence within the EU's borders. Now, Linden Lab not only have a VAT registered business in Brighton, but they're processing payments in the UK too.

Any VAT irregularities which result in a consumer being overcharged (due to lack of notice period, bad advertising, etc.) will be resolved and the consumer will be reimbursed what they are owed, I promise you.

I agree, but these semantics are huge in cultural terms. A European typically sees "price" as meaning "all in", whereas we in the US distinguish between the "price" and the "tax", seeing them as two different things except as you note for a handful of items -- which in my view, should also separately show the tax so that people can see how high it is. But in any case, no doubt LL followed US conventions in its pricing (ie setting the price and not including any kind of taxes in it) and this doesn't comply with the laws of most European countries -- but as you say, LL was simply ignorant of the rules.

All Im saying is if they dont give foreign companies to whom this tax is new ANY wiggle room at all, they are shooting themselves in the foot. Becuase if enforcement is tricky then going too hard after people begin COMPLYING it is a bad idea.

And if they come down on LL too hard they will pull up stakes from the UK. Will be a dollars and sense thing.

Now if your consumer protection laws are that strict - then it sounds like you might get that Month's VAT charge back.

And if it hurts LL too much financially we all get a price increase for Christmas.

Hey, if LL pulls out of Brighton, that would mean no one would have to pay VAT

(I personally tend to trust things Tateru posts on SLI, other people may feel different )

http://www.secondlifeinsider.com/
If LL has been passing on VAT for 2-3 months already then it's unlikely they're not in full compliance already and with everything all sorted out as far as the EU is concerned.

That does make it more curious as to why they couldn't give adequate notice though, since it only applies to (recurring) fees giving a month advance notice wouldn't have really made any difference, no EU resident could have "stockpiled" anything.

I find it hard to beleive that theyve been paying for 2-3 months and somehow during that time didnt find out how fee notices work, without being willing to carry over one additional month.

That would really be incompetant. Though I suppose possible.

Of course it could be the 2-3 months really have hurt their cash situation.

They should just have told everyone 2-3 months ago though - That would have satified the notice requirement.

Unless it really was about them Unloading all this new land they needed to sell?

Yes, lol, exactly - which would seem to suggest it would be in the Europeans Tax collector's worst interests to come down on LL for not giving enough notice.

Yeah but I think Colette's point is that that's the last thing the Inland Revenue wants. Regardless, given LL's desire to comply and the amount of VAT they've sucked up already, I can't see them upping sticks and leaving because the IR demands they refund customers for VAT illegally charged over a single month period.

The Inland Revenue and Trading Standards would basically get a flogging in the national press if they weren't seen to abide by the law and protect the consumer's rights in this case.

My feeling is that it is exactly like doing nothing, because no real notice will be taken of it, except that participating in the petition nonsense gives it a veneer of legitimacy since it can be, and is, held up as an example of the government engaging with the electorate.