Hi everyone, well since Wordpress is so restrictive for 3rd party integrations Im trying this option here instead.
Wednesday, July 9, 2008
Monday, October 8, 2007
VAT in Second Life
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 Lab 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 Lab 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 Lab’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 LL 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, as in a sudden realization.
If Zed's version is correct then last week's action is a raise of SL prices to EU residents, since prices have always been inclusive until LL decided they cannot afford to absorb it any longer. Furthermore if Zed is correct then LL have had ample time to plan, notify and manage the application of VAT to us EU residents. Why not come out and say it!
To those who have believed Zed's 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, a warning that could have been at least a week prior to the application instead of the same day.
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 Lab has indeed been paying VAT on our behalf!
See my other blog at http://dumisani.wordpress.com/
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 Lab 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 Lab’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 LL 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, as in a sudden realization.
If Zed's version is correct then last week's action is a raise of SL prices to EU residents, since prices have always been inclusive until LL decided they cannot afford to absorb it any longer. Furthermore if Zed is correct then LL have had ample time to plan, notify and manage the application of VAT to us EU residents. Why not come out and say it!
To those who have believed Zed's 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, a warning that could have been at least a week prior to the application instead of the same day.
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 Lab has indeed been paying VAT on our behalf!
See my other blog at http://dumisani.wordpress.com/
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
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
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.
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.
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