VAT Discussion

[Junts]

But be patient, we have politicians/lobbyists pushing for taxes on internet purchases.

To clarify a bit - USA has a Sales Tax (our equivalent of VAT), but it is added on to our purchases after everything is rung at the register. VAT, in UK anyway, was always added into the displayed price of an item.

However, all US sales taxes are state or city taxes, and there is no federal sales tax, which is a big part of why sellers are not required to collect it in online sales - its nearly impossible for them to determine what jurisdiction you're making the purchase from, since it's not only state but municipality that matters.

In the US, the federal government is funded primarily by income and capital gains and corporate taxation, states with a mix of sales and income taxation, and municipalities and local jurisdictions (like school districts) with real property and sales taxation.

edit: also, state-mandated sales taxes in the US never exceed 10%, and I believe 6% is the most common number. Municipalities often implement higher, but item-specific sales taxes. For example, Washington DC has a 15% sales tax on restaraunt purchases. Generally, these taxes are designed to strip money from tourists and the things they buy (hotels, restaurants) and avoid punishing actual residents, since the residents elect the politicians who implement them.

[Dacron123]

Please note that there is no "generic" rate of VAT or a general EU fund that VAT can be paid into. If this price hike is genuinely for tax purposes then each "tax" payment has to be paid directly to the country from which the payment originated.

There is no point in comparing payments made by US based players with EU players. The whole debate is about the legitimacy of Turbine's claim that the price hike is due to having to pay VAT.

All EU players should contact turbine and ask them for their VAT registration number for their country. Until they can provide us with that information we should not buy any more turbine points.

Spread the word.

[wez]

thank you for opening this thread,
but still no answers.

[quijenoth]

I'll quote myself from the previous post.

Under UK law the purchase of turbine points to use as currency within the game would be treated the same way as purchasing credit within that country.

If you purchased a $10.00 voucher with UK money you would pay no VAT on that voucher.
however if you then spent that voucher you would be liable to VAT on that transaction.

So in other words Turbine should only charge VAT on VIP subscriptions (which is VATable as it is a service) and on the in-game transactions when using Turbine points within the DDO Store.

The problem with this is that there is no defining currency conversion for turbine points and thus would probably result in VAT being charged at the value of the currency on the open market (which is likely to be nil).

This information comes directly from the HMRC VAT Helpline.

Now this really affects both turbine and its customers.

Like all MMOs, the charge for a service is deemed by EU law to be eligible for VAT. So if you pay for a VIP subscription VAT has to be paid.

However the purchase of Turbine points (defined as credit) to purchase in-game items and features is not subject to VAT until the item has been purchased. since all items in game are non-refundable, non-exchangable VAT cannot be charged on them and since they have no monetary value even if VAT was charged their value would be nil. It would also be difficult to track purchased TPs versus earned TPs as they are spent jointly.

As I also commented in another thread the only sticking point on the credit side is that as a purchaser of TPs (credit) you are entitled to 45 days customer "service" and that could therefore be deemed VATable.

Turbine also needs to declare the customer service as the VATable charge (and the matching company VAT registration number). A customer might also ask the question of "can i forgo this service?" to avoid being taxed.

The big question here is what does this mean for EU players?

Ideally from a customer point of view TPs remain non-VATable and VIP subscriptions in the EU have a unique price based on this.

I've not held a subscription for DDO so I assumed VAT was added. If not then customers have been getting a good deal for some time and Turbine could find themselves paying a large sum of VAT arrears (assuming the Revenue's pursue).

Now I'm no expert on US sales tax but I assume they would follow similar guidelines to VAT. The only difference is they are paid after the purchase. whether Sales Tax should apply to TPs (credit) i don't know.



Q - UK Accountant

[Valiance]

Besides VAT Turbine also has to deal with exchange rates ect. It all comes down to supply and demand. If people will pay these prices they will stay. If not they will drop. Simple.

[dunklezhan]

Please just publish your VAT registration numbers Turbine. All countries that have VAT have such a number, it's not confidential, ergo there's no reason not to publish them. By law you have to put them on any receipts anyway.


And you really do need to address the issue that VAT differs from country to country and so prices should differ anyway. Its one of the few things the EU allows individual countries to still set themselves - you can't just put a blanket VAT cost on and apply it Eurozone wide.



I don't object to paying VAT, as it happens, and if that means higher prices for me, well... I'm not happy, but I don't object except on general moral, i-don't-like-paying-tax-but-who-does grounds. Its the law here, after all (I would query whether VAT really applies to these sales, but... /meh. need a tax lawyer for that one and I'm guessing WB have plenty of those).

I do object to it suddenly appearing without warning - particularly since LOTRO players got a heads up well in advance - and I worry, without the associated documentation such as VAT registration numbers, that Turbine could come a cropper and worst case end up having to suspend TP services in certain countries while you sort yourselves out.

Get it right now though, and that particular risk need never prove true.

If there is any problem -and I would obviously hope this would be accidental - with the way you've set yourselves up to charge and pay VAT, and if players feel badly done to, it only takes a few people contacting their local tax authorities and raising suspicion for Turbine to end up in trouble in the relevant country (probably not for a good while, knowing the glacial speed of civil service investigations). I wouldn't want to see that happen. I don't even think its particularly likely. But it would still be bad news, n'est pas?


And a little food for thought - over the last couple of years, a great many companies and organisations long thought to be untouchable have been 'got' for tax owed in the UK. Many of these thought they were perfectly safe because they beleived they were engaged in tax avoidance which is totally legal. They found out the hard way that in this country (the UK), the legal system puts the benefit of the doubt with the tax authorities, not the individual or organisation, so it may look like a loophole to you, but if the Inland Revenue disagree, don't expect a court to feel differently about it - our current political masters are very keen on closing off as many tax avoidance loopholes as possible in addition. Don't know about the rest of europe, but its certainly true here. Don't be that guy, Turbine!

[Requiro]

Besides VAT Turbine also has to deal with exchange rates ect. It all comes down to supply and demand. If people will pay these prices they will stay. If not they will drop. Simple.

No. It's about trust and reliability.

If you know that VAT is 19% and price is rise to 25% you wonder what's going on?

And with more information in this thread, it seems that Turbine tried to get more money and blamed on VAT.

It's a high time that some of the Developers will answer to our question. It is not about game any more, but about product.

[dunklezhan]

It's a high time that some of the marketing and management types answer our questions. It is not about game any more, but about product.

Fixed requiro - Devs have nothing to do with this.

[Lorien_the_First_One]

We appreciate that the collection of VAT is something many of you have strong opinions on. Creating multiple threads to discuss a singular topic, however, is somewhat counterproductive. It makes it difficult for us to follow the discussion, and it makes it hard for the community to keep up as well. We would appreciate it if you would restrict all your comments to this thread going forward.

Please remember to follow our Community Guidelines when posting in this thread.

Thank you and we appreciate your cooperation.

Uh....shouldn't you have started by explaining Turbine's VAT implimentation and really made the thread useful?

[SisAmethyst]

Well, first of all, VAT in Europe is quite different by country and differ between 0-25%. It as well depend on the type of good, as certain types have a lower VAT (food, newspapers, ...) and most countries in the EU are probably below the 20% general VAT.

Said that I additional wonder why a German or French player should pay UK VAT taxes as those players have nothing to do with the UK, except of speaking English in the game. Collecting VAT would as well mean to declare those taxes, which in other words mean if Turbine claim different taxes per Country that this tax is actualy meant to be given to that country, which would mean Turbine need a tax number in all of the countries. Or as it was before to make it easier define all those goods to be taxed in and by US law. If the US citizens not pay taxes, well, then there is no reasoning to add those values on top of the price.

Further the EU law say that you have to declare and display taxes on a a price before hand of purchase. In fact if you go in France or Germany in a super market you will always see the price of the good and as well declared the amount of the taxes and will have this declaration even on the paper bill. If it is not declared there, a customer not have to pay it, but the seller has to come up for this.

Also as mentioned the good you buy in the super market for which you pay VAT is a movable good/chattel but the online game is not. In fact I play on a US server, so the good and the online service is resided in th US. I have to pay my internet provider a bill that include taxes to be able to connect to that server, that is my end of the obligation. If we have to suddenly pay taxes, well, then by the same rule for everybody, nevertheless where this person is currently sitting. This as well affect all the US soldiers and US embassy members that are currently stationed in EU.

If this VAT just came up because someone is unhappy that the exchange course of dollar to euro make look the price to be lower, then this is an economical thing but can't be justified by suddenly applying a made up tax value. In fact that still mean that for me it has the same worth, regardless if I am in Japan and have to pay 828000 Yen due to inflation instead of $10. Not to mention that I pay the bill usually directly in US dollars.

Maybe it is due to a Turbine Division is in the UK, well then, but there is noway near a VAT tax in Europe that would justify a 42% price increase!

Don't get me wrong, I have no issues paying may taxes, and I do. In fact someone who move inside of Europe has to declare this taxes for each of the country individually. There is no common way of paying taxes in the EU. If I suddenly have to pay taxes to the US, fine, but then I will add this to my tax declaration papers I already have and want exactly know whom I pay how much for what under which jurisdiction (as there are for example ways to limit or get taxes refunded).

[Altkey]

Where is the post or page that mentions the prices are due to VAT? If they are saying "our prices have increased because we are required to pay a VAT" it seems a much different case than "we are passing on the VAT requirements directly to you."

[SisAmethyst]

Besides VAT Turbine also has to deal with exchange rates ect. It all comes down to supply and demand. If people will pay these prices they will stay. If not they will drop. Simple.

I pay the exchange rate on my credit card, not Turbine! If suddenly the price increase by 42% I strongly have to consider canceling my sub as it will become costly to play!

[Lorien_the_First_One]

Well, first of all, VAT in Europe is quite different by country and differ between 0-25%. It as well depend on the type of good, as certain types have a lower VAT (food, newspapers, ...) and most countries in the EU are probably below the 20% general VAT..

Turbine is deemed to be selling in the EU from the UK.

Under the 6th Directive for EU VATs:
"Distance sales treatment allows the vendor to apply domestic place of supply rules for determining which member state collects the VAT. This means that VAT is charged at the rate applicable in the exporting member state" http://en.wikipedia.org/wiki/Europea...-ReferenceB-21

That means they charge the UK VAT to keep it simple and the UK government gets all the cash. The exception to that rule is if they sell more than €100,000 to a particular country over a 12 month period - at that point they need to charge the local rates. (And that tells us something right there about the size of the revenue stream from non UK EU countries)

[Lorien_the_First_One]

I pay the exchange rate on my credit card, not Turbine! If suddenly the price increase by 42% I strongly have to consider canceling my sub as it will become costly to play!

If they are now pricing in Euros then you will probably be charged in Euros, meaning it is them, not you, who will pay the exchange in the future.

[SisAmethyst]

...

In the US, the federal government is funded primarily by income and capital gains and corporate taxation, states with a mix of sales and income taxation, and municipalities and local jurisdictions (like school districts) with real property and sales taxation.

...

This isn't that much different in most of the EU countries. However a company is usually allowed to pass the tax they have to pay down to the customer. In case the customer is not an end user, he can deduct that cost. This customer however has to pay taxes again that he can then pass down to his customers. The government not care about the end suer but will only charge the company and therefore only receives the difference.

See as well VAT

If now this price increase is declared to be because Turbine has to pay VAT, then this is a tax has to be passed to the government. If a EU citizen has to pay taxes there it is obligatory that he want to know the exact amount and price as probably his law in his Country allow him to declare those values as for example exceptional cost and therefore reduce his own taxes he has to pay. This system differ completely by country.

Further there is as well a legislation from the European Commission for paying VAT on electronic services and maybe something similar exist in the US as well. As this mean that 'EU suppliers are no longer obliged to levy VAT when selling on markets outside the EU'. I am to tired to get this ordered right in my head...

See as well Taxation and Custom Unions

If they are deemed to be selling in the EU from the UK, then the above will probably apply. Anyway still the point exists that it has to be declared somewhere that this price include taxes. It should be reasonable and visible to the end user for what he has to pay what.

Also to mention then is Missing Trader Fraud: Within the EU VAT, member states charge VAT at differing rates on goods as a form of indirect taxation. All exports of goods however are tax free. This leads to the situation where an exporter will be able to reclaim VAT from the Government, as it will have been charged VAT by the business from which it purchased the goods, however will owe the Government nothing because it has sold the goods tax free.

Maybe DDO would fall below the term 'In many states, a use tax is imposed on items ordered online or purchased in a state with lower or no sales tax, and brought into the taxpayer's home state.) This is a key difference between most sales taxes levied throughout the United States and the value added tax system in many other countries.' taken from the Wikipedia entry above. But then again I would like to know about that 'use-tax' and I doubt it is at a rate of 42%.

PS: At the credit card information in the account window it is stated 'All payments are non-refundable. Prices are in U.S. dollars.' and till now I see on my credit card bill the tax exchange that I have to pay. Further assuming something about the revenue stream from non UK EU countries for something that was just made up is a bit early I guess

[Argila]

Some questions:

- How the Euro value of TP points is calculated? Currency conversion from Dollars? Daily converted? Weekly? Fixed Euro value instead?
- Where is reported the amount of VAT we are paying?
- Where is reported the VAT percentage we are paying?
- Where is reported the VAT number?
- Is the used VAT percentage based on country of buyer/account or it is the UK VAT only?
- To where the VAT amount you collect go? Buyer country or UK?
- Are you planning to incorporate all of the UK law regarding distant sales or just the VAT (refunds for not used content, for example)?
- Is it planed for the VIP subscription to include VAT in the future?

Thanks

PS: As others already said it also, for now I will also make my stock of TPs last until I understand how this all works.

[quijenoth]

If they are now pricing in Euros then you will probably be charged in Euros, meaning it is them, not you, who will pay the exchange in the future.

100% correct - they need to outline costs as EU sellers with a fixed price. Any fluctuation in that price due to exchange rates affects their sales not the customers as traders within the EU.

[Necromisiek]

Well, frankly I don't expect Turbine to explain anything in this topic (they don't want to admit few things, and I am hardly suprised). Instead, I offer some advice - and what's better, I offer it for free.

Primo, Turbine Guys, when you are dealing with Europeans, do your homework before. Europeans are almost oversensitive if currency rates are concerned. You cannot hope to make price raise masked by currency change that nobody will notice. It will be noticed at once. Europeans know the trick all too well.

Secundo, average European knows more about VAT than average Yank accountant does. Don't tell ppl VAT stories if they are directly contradicted by facts - the only result will be even more angered customers. Some may even turn to their tax authorities to check if you really pay VAT - and that may give very "interesting" results. Not that I will do it - price haven't changed for my country, even though it is EU member and has one of the highest VAT rates, so I have no reason to do it (but that doesn't make your explanation more reliable, does it?).

So, good luck, I hope update 9 will be great, and please, be more carefull with your price policy in the future.

Best regards

N.

[Daunth]

First of all, it is normal that Turbine raises the prices a little for Europe. This is due to the "exchange risk" (the risk of losing money as a consequence of currency fluctuations) that they run when selling goods at a fixed price (it wouldn't be the case if all TP were sold in dollars, and their price in euros would fluctuate as well). If the price is in dollars, the european buyer who uses a credit card to purchase TPs will have a different final price based on the current exchange rate. So the buyer will risk spending more than he would have done for the same good some days before.

When establishing a fixed price in Euros, Turbine is taking the exchange risk instead of the final customer. And a company's goal is to eliminate these risks. For example by buying futures and derivates based on the exchange rate... or by increasing the overall price to compensate the possibility of losses (in this case, it's a good bet Euro won't rise much further, so a loss can be scheduled and addressed with a price increase).

Anyway, the rise due to exchange risk is just a very small part of the overall sum, and it COULD justify the difference between VAT and price increase (say 19% and 23%). I'm not saying it does (I still believe they're not telling the truth), but it could be an explaination. Still, the biggest part of the increase would be due to european VAT (of which specific country, by the way?), and that won't be accepted until Turbine provides all the proofs in terms of sum breakdown and VAT numbers.

[Argila]

I would like to point to something other mentioned in one of the closed topics about this...

The site GOG.com, a place where you can buy classic games, haves this:

"Fair Price Package: All customers paying in euros receive a store credit in USD for the price difference between European & worldwide price."
(http://www.gog.com/en/page/tw2v2)

This would appease the European consumers and, even if it is not Turbine fault, reduce the penalty in the TP costs for European costumers.
I also don't see this as to much penalizing for Turbine and it could even increase the European selling of TPs.