VAT! More VAT blogging?

Yep, and again it is after reading Zed’s latest splurge about the application of VAT to EU citizens, and the wonderful and heroic actions from Linden Research, Inc, to try and ‘save’ us from these charges, that I decided to write my own response here.

Reading the blog entry I noticed two issues:
1. Absolutely no apology for the way this tax was applied and its unfortunate affect on a large portion of SL’s population, and
2. No explanation of a defence of the SL product to the tax authorities by Linden Research, Inc.

Let’s leave the first point for later and talk about the second one. Tax authorities are always sensitive to the correct application of taxes, and in terms of VAT the participation of Customs and Excise in the correct definition of such an application also makes for an open forum in all cases between them and the suppliers of such products or services. Zed notes in his response that ‘The tax authorities could not have imagined a service like Second Life which enables Residents to develop and sell land, content or other forms of intellectual property within an ecosystem even though they are not official VAT-registered businesses.‘ – meaning to me as for any other supplier or importer of new products or services, that it was up to Linden Research to negotiate the issue of VAT on SL and to explain to the authorities what differs in SL that justifies a reduced VAT application. If this was done correctly, in my view we would have seen:
1. that we would possibly have paid VAT on premium accounts, and
2. that we would have been excempt from paying for land purchases as these are not a service to the customer of Linden Research, but a service or product to the avatar, and value added tax cannot be justified for such a virtual service or product.

Nowhere in all Linden Research’s responses to EU residents have they explained this process of fighting for our cause, offering instead only the EU VAT directive quote and a very flimsy and unproven story about having absorbed the VAT over the years on our behalf. The latter point raises an interesting contradiction in my view between Zed’s post and Robin’s post earlier in the week, as Zed’s implies that they have been paying VAT on our behalf for some time, whilst Robin’s implies to me that they have only just been discussing with ‘leading VAT experts’ about their liabilities for VAT in the EU… I will leave that there.

To those who have believed this whitewash post of a very badly managed issue, don’t for one moment believe that the Tax Authorities are the only ‘bad guys’ here. Prior to a VAT charge being applied to a new service or product, the supplier or vendor or importer of such a product has AMPLE time to defend its objections and to negotiate with them on the various taxable or non-taxable parts of such a service. Furthermore ALL the LL posts about this issue make it clear that they have had AMPLE time to forewarn us of pending VAT charges.

Zed, you and your team have let us down, and if you disagree prove it to us by being transparent about your fight on our behalf and the proof that Linden Research has indeed been paying VAT on our behalf!


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