Prices rise as eBay adds VAT

By Graeme Wearden, ZDNet.co.uk, 5 June, 2003 16:19

NEWS

From next month, some of the charges that eBay levies on European surfers who use its service will increase. The Internet auction site confirmed on Thursday that it will begin charging VAT (value added tax) on all its sellers fees from 1 July, a move will bring eBay into line with the European Union e-commerce VAT directive, which comes into force on that date. VAT in the UK is 17.5 percent. Rather than increase all its prices by this amount, though, eBay has implemented a range of changes to the fee structure of eBay.co.uk. "At the same time as the implementation of VAT, we will restructure eBay's insertion, feature and final value fees. We will raise some fees, reduce others, while keeping some the same. In addition, we have changed many of our reserve fees," explained the company in a statement. Jennie Reed, marketing and communications manager for eBay UK, told ZDNet UK that the impact of these fees will depend on whether the seller is a business or an individual. Businesses can reclaim VAT, while individuals cannot. All eBay sellers are charged two fees -- an insertion fee, which is based on the starting price, and a final value fee, based on the value of the successful bid. Sellers can also pay to set a reserve price, to have their entry featured prominently on the site, or to include one or more photos. This means there are over 30 different fees imposed by eBay, although a seller wouldn't be required to pay any more than two. A total of 26 fees will go up from 1 July. Some of these have increased by around 17.5 percent -- such as the starting prices, which have been raised by between 16.5 percent and 33 percent, and the photo hosting fees, up by 20 percent to 12p from 10p per photo. Others have been raised by more. For example, having an item featured on the main eBay.co.uk page will cost £49.99 from 1 July, up from £19.95. EBay.co.uk has also brought in three new charges, including a cheaper insertion fee for goods with a starting price under £1. One fee -- the cost of having a lot displayed in bold -- has fallen from £1 to 75p. Four more fees have remained the same, which actually means a reduction for businesses selling on eBay.co.uk as they will now be able to reclaim the VAT. Some analysts believe that these increased charges could hit European demand for eBay, one of the success stories of the dot-com boom. Reed said that it was "very early days" to predict the impact of the new charges. "In the past, we've seen a lull for a couple of weeks, before the site regains its vibrancy," she added. The e-commerce VAT directive was brought in amid claims that some Internet companies were gaining an unfair advantage on rivals by being based outside of the European Union and thus avoiding charging VAT on their services -- with AOL probably being the most well-known example of this. The new directive means that a company must pay VAT if it provides a service within a country where VAT is charged, even if the company is based elsewhere. Reed explained that sellers will not be able to get around eBay's VAT charges by using eBay.com instead, as they will have to submit information -- such as their address -- that would give away their location. EBay first announced that it would impose VAT on all its sellers fees back in March. The company has now released details of how businesses can reclaim VAT that they are charged as a result of using eBay. VAT information can be seen by clicking here, while the new fee structure can be seen by clicking here.

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