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Subject: Re: UKNM: VAT and trading locations - RE: UKNM Digest V1 #115
From: Ben Thompson
Date: Fri, 18 Dec 1998 14:43:42 GMT

On 17 Dec, Steve Johnston/IMRG wrote:
> Presently there is no formal agreement, between anyone, about whose VAT
> should apply, there are a number of arguments about country of origin and
> country of consumption, but common sense and market example is likely to
> prevail.

True but the EU rules are formalised. VAT is paid at the rate where the
good is purchased (or in the case of mail order and cars) at the rate
of the country the good is imported to. The rules are simple and

This is of course fine for tangable goods (CDs, Videos and the same).
Books are the wonderful exception to this where America's sheer size and
the lack of VAT makes importing them cheaper. (Actually I'm not thinking
of Amazon so much as Bookpool.com and the other 35%+ discount places
that are arriving. As an example the last lot of computer books I
purchased where 1/2 the UK price after Next day delivery).

> Look at CDnow, previously they left the problem with the consumer, so on
> occasion, having bought your super-cheap VAT-free CD from the US a nasty
> surprise would arrive in the shape of a DHL bill for VAT on behalf of UK
> Customs & Excise and a small(ish) handling charge for DHL's trouble. This
> didn't happen too often, and the volumes were such that it wasn't causing
> any meaningful customer problems.
> You go to CDnow now and buy from their European centre, you will get UK VAT
> added to your bill prior to shipping. So you are buying from a US firm with
> a base in Holland and yet are paying UK VAT.
> The answer lies in the customer experience and scaleable models. The
> tin-pot past had little of the first and none of the second.

But this is only logical where there is a tangible good. However where
the only thing being charged for is access to a website there is no
incentive to operate in the UK. While the government may already be
talking about corporation tax as a economic battle ground any website
worth its salt is going to be based in the US. No VAT, Banks that don't
run away and that's before we talk about Venture Capital (although I do
actually have access to it in the UK if I actually wanted it).

And on that thought I'll wish everyone a happy Christmas. There is the
annual Christmas Pressie to come. Full details probably at the beginning

of next week.


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  UKNM: VAT and trading locations - RE: UK, Steve Johnston/IMRG

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