Questions LL should answer re. VAT

Lindens should definately have given those people who wish to avoid paying VAT time to reduce their land tiers.

ALTERNATIVELY Lidens could have easily softened the blow and sugared the bitter pill (for me at least ) by offering either to increase the amount of land owned by vat payers or by giving a bonus linden payment each month - I believe its called consumer satisfaction and neither move would cost lindens anything.

Both would have been non affected residents subsidizng the whole thing tho.

The Lindens shouls have absorbed the cost for the 30 days notice time, but other than that pass the cost for the VAT along.

they are in fact legally obligated to under UK contract law, as it represents a change in teh expected amount to be billed.

Under UK law, this isn't seen as LL suddenly adding VAT to the bill - it is seen as a price increase, since the VAT was always being charged (under UK law), as it wasn't explicitly noted otherwise in the bill. I'm fairly certain other EU countries have similar rules. And price increases require at least one billing period of notice.

I would not recommend anyone try this unless you want your account with LL suspended.
When you write to the credit card company, depending on the credit card company, they will either debit Linden Labs billing account until the query is resolved or rectified or notify them that there is a query and in both cases Linden Labs will have to supply information as to why they billed your card. If this happens your account with LL will in theory will be in the minus and therefore they will most probably suspend your account until payment has been received.

There is one thing no-one has commented on in any of the threads that have been posted, and I really do not want to upset or put anyones noses out of joint, but given the circumstance I cannot complain as a European who also now pays 20% more because I agreed to Second Lifes Terms of Service.

Quote:
By using Second Life, you agree to these Terms of Service. If you do not so agree, you should decline this agreement, in which case you are prohibited from accessing or using Second Life. Linden Lab may amend this Agreement at any time in its sole discretion, effective upon posting the amended Agreement at the domain or subdomains of http://secondlife.com where the prior version of this Agreement was posted, or by communicating these changes through any written contact method we have established with you. End Quote

Linden Labs with the increase of the VAT have done exactly as stated above in the TOS, we agreed to these conditions and I do not think that we can really do anything about it.

They themselves as a business are complying with the Laws of the Land and in this case the Land is Europe. The law took effect from July 1 2003, it may be possible that Linden Labs have themselves had to pay back, back tax but that we will never know.

Well, no. The problem is that it's likely to evolve something like this.

European Tax Inspector: "We see that you've started submitting VAT for your monthly usage fees. Thank you."
LL: "No problem."
ETI: "There's just one problem. We notice that last month, you raised a lot of VAT and paid it in, but this month the payment has gone down a great deal. Could you tell us what's happening please?"
LL: "Um, well, a lot of the Europeans stopped buying from us."
ETI: "You mean they stopped using your service?"
LL: "No - they switched to paying their fees to other Americans instead, who resell our services."
ETI: "Well, those other American companies should be collecting the some VAT, then. Can you give us their names and addresses?"
LL: "They don't have to. They're private individuals."
ETI: "But you work with them to establish them as resellers of your service?"
LL: "Um. We allow anyone who wants to to pay a fee for a service, and then resell it if they want to, yes.."
ETI: "Ok.. a US company can appoint private individuals resellers of their electronic goods to dodge VAT. We'll pass that on to legislature for investigation."
LL: "Um, no, no! They aren't taking any real money, after all."
ETI: "How are they reselling the services, then?"
LL: "Well, they're taking the money in Linden Dollars.. um, play money."
ETI: "How do they pay you for the services, if they only earn play money from reselling?"
LL: "Well, um, they can sell the play money for real US$."
ETI: "So the play money can be sold for US$."
LL: "Yes. People can work in world, earn play money, then they give the play money to Americans, and the Americans use it to pay for our services. So there's no VAT to pay, because Americans don't have to pay VAT, and the Europeans are only paying play money."
ETI: "And what if the Europeans have extra play money?"
LL: "They can sell it for real money."
ETI: "....."
LL: "What?"
ETI: "So your "play money".. can be converted to real money at any time.. and you're just choosing where and who converts it to minimise tax?"
LL: "Sure... um.... where did those black helicopters come from?"

Yes you are all likely right on the 30 days notice issue. If a group of you gets together and complains about that, either to LL or to your local consumer watchdog organizations, you may be able to make some hay out of that.

But in the long run (ie, the longer than 30 day run), the underlying lack of competitiveness is due to your countries' tax laws. The only way it would ever be a level playing field is if noone paid any VAT or similar sales tax. And I strongly suspect LL wishes that this could be the case -- in fact I would bet that this was how they viewed the matter until very recently when they started looking more closely at the European sitiuation in light of the number of European players. LL is not out to screw you guys, although I agree that the 30 days issue is an important one -- in the long run, the 30 days issue is not going to be what makes you uncompetitive as landowners, it is the fact that your VATs are so bloody high that does that.

If a TOS conflicts with the law of the land, the law of the land will win. LL are definitely treading on thin ice here. Especially in the case of someone who tiered up or purchased an island a day or two before this announcement when LL knew damn well VAT was about to be charged.

I fully agree, but the only outcome will be that LL are useless at disclosing or notifying its members of any future changes.

As quoted in the blog, they have consulted with Tax officials etc, that did not happen in a day, that would of taken some time. Time they had to put something on the blog.

With regards to the law of the land, I do not think that given the monies involved to take any action against Linden Labs would result in any great result either, the costs would far outweigh the results.

If it is true, as has been said, that none of this would have happened had LL not switch to using a U.K. bank, then yes - LL knew about the VAT and LL knew residents would get screwed.

It was more important to them that they have the U.K. bank (for whatever advantages that offered to them) than that residents would get screwed.

That's how I see it. I could be wrong.

None of this would have happened, if they hadn't switched to a U.K. bank, which has, by the way, made paying LL a real mess.

I would like to know the real reason why LL decided to go to a U.K. bank to charge for their American game.

coco

I don't see where gambling comes into this.

This whole farce came about for two reasons:

1) A bunch of bureaucratic arseholes in Brussels decided to implement a non-enforcable tax on non-EU businesses supplying goods and services to EU consumers. They believe this is fairer to businesses in the EU who are forced to charge VAT, but as we can see, it has disastrous consequences on EU consumers buying into certain, innovative global products..

2) This tax only really becomes enforceable if a non-EU business sets up shop within the EU's borders.
Guess what LL did?

With regards gambling. I don't see the correlation. LL's server farms are still in the US and subject to US laws. Linden Lab is an American company. Their head office is in San Francisco.

They aren't picking and choosing which laws they want to conform with, and just because they've decided to play ball with Brussels doesn't mean they can implement gambling because the laws are different here. Whenever you're logged into Second Life and playing around in a simulator, you're networking with a server on American soil. Expect American laws to apply. End of.

It's important to bear in mind that the 30 days can not run form the date of an announcement. Because billing is based on the highest level reached during the previous month, an increase can only run from the billing date following the announcement.

Many of us started a new billing cycle just before the announcement.
We started that billing cycle with a level of tier and an agreement with LL on what the costs would be for that level. Even if we dump land to tier down right now, we will still be charged for the full level with which we entered the billing cycle.



After that it's up to LL to set the prices it charges in various markets, taking into consideration the economic climates in those markets. There is no law that says a business has to charge the same dollar equivalent in all regions of the world.
There's a reason that so many European letterboxes get DVDs in the post from the Far East.

This has nothing to do with LL moving to a UK bank, read the link on the home page in the VAT Blog.

Dear Lindens .... Is that plus VAT or including VAT?

To be honest I don't think anyone should expect LL to *lower* the USD rate it charges to European customers. That would be contrary to logic, as the overall cost of goods and services in Europe is higher, on average, than in the US.

Nothing at all I guess. But why should I pay an illegally increased charge? The ToS won't overrule a legal requirement to give notice of a change in billing.

Equally, LL is under no legal obligation to continue trading with you once all bills are settled, and can in fact suspend accounts (within the terms of the tos) while there is a dispute in billing.

I don't think it has anything to do with a UK bank either. It's because they became a VAT registered business presence in the UK (and therefore, the EU).

The VAT policy passed in 2003 to which I refer above is plain unenforcable unless a non-EU company establishes a presence here.

Linden Lab opens an office in Brighton..
..and then this.

nothing - on the other hand you have acted reasonably throughout and will have passed the decision whether LL were legally entitled to raise charges without notice onto the CC company (the CC may decide in LL's favour) - so LL would be acting unreasonably to do so.

If you were suspended you could capitulate and just pay the outstanding fees anyway (having made the point) - or insist on arbitration procedure outlined in the new TOS (7.3) submitting the CC's company's view as supporting evidence.

There is, as indicated, a possibility (I suspect faint) that LL will cease any subsequent trading with you.

If you are worried, you could send in a ticket along similar lines but saying that if charged the new amounts before Oct 27, you reserve the right to raise the matter with the credit card company.

Matthew

P.S. I should disclaim any liabilities if you chose to follow this course of action - you do so at your own risk.

Under that law they do not have to have a presence in any EU state/Country, it is primarily for a non EU Business supplying Services to an EU Consumer.

Again, I would suggest residents read this link to better understand the law in question.

http://www.ibls.com/internet_law_news_portal_view.aspx?s=latestnews&id=1746

Quote -'Both would have been non affected residents subsidizng the whole thing tho'.

Hardly. Give people lindens and they spend them..buying from other citizens and in fact encouraging trade with in sl.

The same if lindens allow an increased land amount. Land is purchased from other residents.

How are other non VAT paying residents possibly subsidising.

Unless of course Americans dont want people from the UK or any other European country here.....

The logic that should apply is marketing logic, within an overall financial logic.
LL have pissed off a large part of their market, mainly because of their incredibly brain-damaged communication behaviour.
EU residents face into a month-end billing in which their costs have unexpectedly been increased by 17.5%. They have absolutely no way of reducing that increased cost down to budgeted and agreed cost, other than defaulting on payment and losing everything.


The VAT thing was inescapable, regardless of the Brighton base.
The manner in which LL chose to deal with it was not inescapable.
--- OK. The hamfisted way that they did it was *predictable*, because of their abysmal track record, but not inescapable.

Well ... support ticket submitted. Lets see what they come up with this time ... "Watch the blog" perhaps?

Fine. I've sent in a support ticket notifying them that an attempt to bill me an increased fee before a period of proper notice will be reported to my credit card company as an unauthorised transaction.

What have I got to loose? I get my account suspended for a while so I can't access a buggy crash prone system? People should stop just buckling and saying "oh well yes I guess LL are perfectly reasonable to do that."

In this instance they are not right and people should try at least to assert whatever rights they have. It's about time LL's PR department realised they have a job to do if they want to retain customers.

Okay

I get the uproar over the sudden hike in the price Euros will have to pay.

I get the uproar over their being insufficient notice.

I get the uproar over badly explaining the pricing.

I get the fact that them setting up shop in England help facilitate this problem.

These are all legitimate things - and LL botched it all from what I can see. Poor customer service, again.

BUT -

I dont get the (few) people who think that they should have their Prices discounted by the amount of the Tax.

Reducing Linden Labs profitability either hurts everyone, or else they will have to raise prices on everyone to make up for the discount given.

The tax goes right to the government so it just a burden that helps no one here. Its only fair that those who live in the countries who enjoy the results of those taxes have to pay the taxes.

For example, since I live in Ohio I shouldnt have my prices adjusted to cover taxes in Austria to subsidize the Austrian VAT for an Austrian Player who doesnt want to pay it.

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

A good question - What if they shut down the Brighton office? would they still have to charge the VAT?

In reverse order:

Yes, they would (or to be more precise LL would be liable to pay VAT on any monies received from the EU).

In general, I don't think anyone expects that their prices should be discounted by VAT (beyond a suitable notice period that is). However, the ensuing price differential between the EU and elsewhere does disturb one of the ideals which underpin SL that regardless who you are, where you are from etc. you have a level playing field to build a business, occupation, life etc. and people (both EU and US) aren't comfortable with the imbalance the VAT issue has caused, even if it is unavoidable.

Matthew