A heart felt thank you to all supporters of Bishara Resorts

After seeing the impact of VAT charges on my personal costs in sustaining Bishara Resorts, the support from those who heard of my situation or who read the issues here in our blog, has been fantastic! Emails and IMs of support, some donations even, have been pouring in over the last few days and I am delighted to have people here who have treated me like their own, like family, and who have shown such support to me.

I am sure that we will weather the VAT storm, and that someone in LL will finally grasp the point about VAT and the definition of a product for Value-added taxation that resides with THEM and not with the tax authorities, so that sanity may prevail and we may go back to a level playing field within SL. Regardless the outcome, I am so much more positive today than I have been in weeks, and I have you all to thank for that! Many many thanks from me, Dumisani Ah, and my ‘alt’ Johan de Lange 🙂

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Bishara Resorts Financial Report

Some of you have asked me what it has cost me to date to develop the resort as it is today, and though I do not have the exact costs on hand I will explain briefly in a summary:
1. Bishara Resorts is made up of four islands or sims (simulators) that each cost me USD1675.00 per island and then cost USD295.00 per month in tier fee per island.
2. Bishara Island has a mall on it, built by myself and stocked mostly through a wholeselling deal with designers, again at my cost. The stock in the mall for example would be well over L$100,000.00 in stock purchases that have remained UNSOLD or still inside the vendors. The bowling alley was purchased from Iron Games and cost approx L$15,000, and the fish in the aquirium were also bought in-world, although I do not have the cost for that. On the top floor or roof area we housed a Tringo game before gaming was banned that cost approx L$20,000.
3. Bishara has many other activities like the golf course, the diving and reef areas, the fishing areas, the spa, and the waves and animals all around. The cost of the development of these open areas again is well over L$150,000 since the start of the first island, and may well be over L$200,000 by now.
4. Majini’s EPIC waves cost L$82,000 and are also free for use to residents and visitors.

So even in the roughest estimates the capital costs of the project to date, not including lost inventory (an old SL problem), amounts to USD 8,250.00, with a further USD 1180 per month just in tier fees, and not including maintenance or object replacement or the time we put into the project.

One last thing for those in the USA and the Americas who make such calous comments to EU citizens on the VAT blogs like ‘get over it’ or ‘stop crying about it’ and so on, just work out what 17.5% unannounced fees do to such a budget as mine and how it may lead to projects like mine or others to close down, and how that will impact your enjoyment and life in SL. Help us instead to make a proper and mature opposition possible to an ill-planned and very ill-executed discriminative fee by SL. Furthermore, for those non-EU residents who think EU citizens should complain to the VAT authorities because its THEIR fault we are paying, please do better research next time on how VAT is calculated and who is firstly responsible for defining the product that the VAT is applied to. You may be surprised by your own findings and hopefully it will lead you to help the EU residents instead of simply trying to mudsling again.

To all Bishara’s supporters, thank you for continuing your support of our project, even with the smallest donations, and rest assured that we are not planning any kneejerk reactions as Linden did regarding the costs and the VAT charges.

Bishara Resorts,VAT and our growth!

The last few months have seen a huge expansion for Bishara, with the estates growing from Bishara Island (1 sim or island) to four islands in size, with Bahati Island and Mandhari Island as our residents and new commercial regions, and the exciting Epic wave region we call Majini Island.
The main estate remains Bishara Resorts, and the development of the estates will be as follows:
1. Bishara Island will be the heart of the Bishara Resorts estate, as the name implies both ‘commerce’ and ‘gift’ or ‘blessing’ in its meaning. Bishara has all the exciting free activity features on it, and also has the first and original reef we started way back in February 2007.
2 Then the other sims will be split into three types, hopefully reaching 9 in total including Bishara Island. These will be volcanic, beach or open ocean. However only Mandhari and Majini Islands will be normal sims (normal sims have 117 prims or objects per 512 sq meters with 15,000 in total for the whole 65,500 sq meter region), as the rest of the volanic and ocean or water sims will be Open Spaces or low prim sims (low prim density means that we have 15,000 prims over FOUR sims, not one.). These sims or islands will create an open space around most of Bishara, Bahati and Mandhari, and allow free space for water channels and horse trials around the entire estate.

Most of you may know this, but it is important to realize that the Bishara Resorts region and estates are all covered by Dumisani Ah only, not sponsored by a corporate company or a charity or Linden Labs. Parts of the estates that are not wholly financed by Dumisani Ah are the land parcels sold to some residents – currently 7 parcels all together. Everything else on the estate has been financed privately by Dumisani Ah, including stock in all the Bishara stores except for BodyFashion and Tatuii.
I state that here as I wish for you all to understand why we are so stressed by the application of VAT on ourselves, as it has increased our financing costs to run Bishara by 17.5% without any recourse, i.o.w. we cannot charge this through to anyone as the project, the Resort, has been financed to be at the free disposal of our residents and visitors.
In fact we cannot charge this through to anyone in SL regardless of the above point as only EU residents are VAT charged by Linden Labs and therefore as stated in our previous posts, we would be completely uncompetitive against other US resident owned properties if we did.
Sadly in the SL blogs I have noted just how much this VAT issue has caused the usual US vs EU vs UK arguments to flair up again, a very sad and childish way to deal with the issue. We hope that our own residents and in-world friends would instead unite to fight this alongside us so that we can get some reasonable compromise setup between Linden Labs and the EU residents like myself, regardless of where they are based in RL.

For the interim there will be no change to Bishara or its islands until VAT has been sorted out and comprehensively understood, and the current island developments completed and the Open Space islands dropped. Until then the project will not expand beyond its current island size.

We will keep you all informed of all new changes and additions in-world!

Asante,

Dumi

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!

VAT continued

In a further comment to the current VAT fiasco, Robin Linden refers to an article of the EU Tax directives that forced Linden to take the steps they did. Reading that BLOG entry has left me somewhat shocked for two reasons:
1. In it he claims that Linden Labs have been meeting with ‘leading VAT consultants’ in the EU that led to them suddenly having to charge VAT – he misses the fact that if this was indeed true, he is also implying that they should have had ample time to forewarn EU citizens of such an impending step and indeed allow some debate on the issue. Furthermore these same VAT officials would have made it clear to LL that charging VAT additional to a quoted fee or invoiced amount in the EU, and in my case specifically the UK, is illegal. It leaves me with this thought – who were the ‘leading consultants’ offering their advise to LL and were they indeed qualified to do so?
2. He refers to an article in which electronic services or products are shown to be VAT’able for several reasons and it gives an argument that leads one to believe that LL had no choice in the matter. – In fact they do and the article referenced here is misleading and used out of context. LL is NOT delivering electronic services or products to EU or UK citizens at all, as indeed is seen by the charges to us made in USD, and not a local currency. Furthermore these electronic services refer to products or services to the player, not the avatar, and refer specifically to music files, video files and game memberships. At worse we could be charged for playing SL through the inclusion of VAT in the premium membership fee. None of the other content is in any way delivered to the player, as it all refers to in-world activities that can have no direct impact on the player outside that environment. In a simple way the player cannot download the new land he or she bought, he or she cannot download the Lindens exchanged, as these are both only valid in the SL world or grid. SL furthermore made it clear in its ToS that it only facilitates access to SL for players, and again here VAT may be valid with proper consultation through a membership fee inclusion. However it makes it clear through the ToS and through its own actions in the past that it sees itself as a US based company and service that allows open enrollment to its world, and leaves the in-world activities and content creation to its residents. The clearest action that LL made to indicate its own position on the matter of a global platform or US platform was the outright banning of gambling in Second Life, a very harsh step aimed at reducing its exposure to prosecution in the US under US laws of gambling prohibition. No consultation or debate was allowed to those residing outside the US in countries where gambling is completely legal and not an issue at all.

So here again is my argument: As an owner of several sims in SL where content is offered to residents either on a free to use basis or sold against other competition, the current VAT charge and manner of charging has not been properly considered at all by LL, as it seriously impacts my own competitiveness in Second Life.
Furthermore the ownership of these very sims has not given me any access to proper debate within LL where the VAT issue could have been debated and discussed, even though it clearly impacts my own activities within LL negatively and one can argue contradicts the very agreement between LL and myself at the time of the sim purchases.
No attempt has been made to communicate with sim owners like myself at all, and no meeting or conference called or chat initiated to debate this by LL.

Does this constitute fair treatment? Furthermore as the Lindens have now indicated their participation and supposed compliance to EU and therefore UK laws, have they considered that by applying VAT in the manner they did contradicts the Distance Selling Act in the UK?

I apologise to other EU residents for my ample use of the UK here, but I am resident there and therefore biased to the understanding of my local legal and tax system and not the rest of the EU. Please add any comments here that are specific to your own situation and I will post them as well.