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Last Updated: Friday, 6 June, 2003, 16:53 GMT 17:53 UK
EBay users hit by sales tax

The online auction house eBay has said it will start charging people selling goods on its site VAT following a new EU law.

According to the new European directive, all internet firms trading in western Europe must now charge VAT on services and products sold from their sites, if the sellers live in a European country.

The move means that seller fees will now include VAT, and eBay admitted the move to charge a sales tax could have an effect on its European business, until now one of the firm's fastest growing units.

EBay said it would increase its fees in Britain and Germany to compensate for any loss of revenue from the new laws.

"Now the EU is going to get its cut," said Michael van Swaaij, vice president of eBay Europe.

But eBay is also using the changes to restructure its pricing policy for the site as a whole, sparking criticism from some users.

Knocking sales?

The new fees will begin on 1 July, with new charges for vendors living or registered within the EU. eBay said it would display the VAT as part of new gross fees to be displayed on the site.

The charges apply to all so-called 'seller fees' when listing on an EU eBay site, including insertion fees, feature fees, final value fees and service subscription fees.

We assume this will have some effect
Michael van Swaaij, eBay Europe

So, reservation fees on goods selling for more than 100 for example, will rise from 1.20 to a charge of 1.2.%; final value fees for vehicles will rise from 15 to 18.

EBay said at the same time as implementing VAT, it would "restructure eBay's insertion, feature and final value fees..We will raise some fees, reduce others, while keeping some the same".

Its 'featured fee' for appearing on the homepage is rising from 19.95 to 49.95 while a 'gallery featured' article will cost 15.95, against a previous 9.95.

Business sellers can apply for a VAT exemption and will not be charged VAT on ebay fees.

EBay will charge higher selling fees in Britain and Germany, its two largest markets, in a move which the group admitted could dent sales growth.

"We cannot predict exactly what's going to happen with us raising prices in Germany and the UK. We assume this will have some effect," said Mr van Swaaij.

Still compelling

Analysts have predicted the move will lead to a slowdown in custom, at least initially.

But they expect sales to pick up in the longer term.

"Business fundamentals remain compelling and potential near-term impact from fee increases is already reflected in guidance and estimates," said Safa Rashtchy, an analyst with US Bancorp Piper Jaffray.

Other internet groups are also likely to be hit by the new law.

Media giant AOL Time Warner has already taken steps to pre-empt the charges, setting up a new business unit in Luxembourg - a European country with a more favourable VAT rate - for its internet group AOL Europe.

eBay seller fee changes
Insertion fees
15-29.99 0.60 0.75()
100+ n/a 2.00
Vehicles 5.00 6.00
Final Value Fees
30-599.99 2.75% 3.25%
600+ 1.50% 1.75%
Vehicles 15.00 18.00
Featured Fees Current fee () New Fee ()
Homepage 19.95 49.95
Gallery Featured 9.95 15.95
Scheduled 0.10 0.12
Source: eBay

Are you an eBay user? Would paying an extra fee put you off using the auction service?

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I pay Austria VAT on every purchase I make on various websites based within the EU, such as Amazon.co.uk, and I have to say that I am furious about it. The EU's decision is extremely shortsighted, and can only result in less development of internet commerce. If people want to use mom and pop shops in the neighbourhood, that is their choice, but people should also have the freedom to shop cheaper on the internet if they want.
Saul, austria

eBay has reached a critical mass now whereby it can put the fees up and I doubt it is going to have any impact on its business. There is no real competition to eBay in terms of its reach and global audience. If the new fees put a few people off littering the site with their worthless rubbish, it may not necessarily be a bad thing.
KatherineA, UK

I am in total disagreement with the new pricing structure - it's yet another example of how we're dominated by Europe to our detriment. However, eBay is still by far the best online auction site, simply because it reaches such a massive global audience. I won't be leaving just yet.
Matt Wood, UK

Through eBay's international trading community I have built a collection of model trains that would have been otherwise impossible. The higher charges will filter through to purchsers, possibly by higher reserve and starting prices. It will not put me off.
Bob Newell, England

I have made bids on e-bay but never actually bought anything - usually find just as good 'bargains' in local stores etc. If I had the misfortune to be living in Europe I would never dream of using eBay again!!
rick kozuch, Canada

I have been selling on eBay for a year and most of my items have started from 1. Now that they have added VAT and increased the fees, I would be using the money made to pay off my fees. I won't be selling on eBay anymore and as for buying - will the remaining sellers be adding extra to their auctions to cover the costs which will be passed onto the buyers? Only time will tell...
Sandra, UK

There is not going to VAT on the goods themselves, only on the commision paid to eBay. The main reason for charging VAT on outfits like eBay has not been mentioned yet - that is to "level the playing field". How could a UK-based auction house compete wih eBay when it had to charge VAT but eBay didn't. This is the same as the Freeserve vs AOL issue, which is actually the reason why the EU made the new rule.
Dave Harvey, UK

Regardless of this initiative, EBay has increasingly used its dominance of the online auction market to take advantage of the people who put it there - we the users. If they don't watch out, they will be seen as... abusing a market position. Someone please set up a competitor
Patrick, UK

VAT on second hand goods? since when?
Johan Ribenfors, UK

The bottom line is that consumers will pick up the bill, again. eBay will take the same or a marginally increased cut and vendors will increase rates to protect their margins. Anything familiar here? The internet provides a new direction of us to move in, why can't taxation be as progressive - VAT = value added tax, where is the added value in using ebay now? Ebay is a facilitator and adds no value to the products being sold.
Neil Brown, UK

I have been a happy user of eBay for quite some time even though the fees were not cheap. To try and increase the prices at the same time (and hoping no-one would notice?) as applying the new VAT rules is sneaky at best and opportunistic at worst.....goodbye ebay.
Matt P, London, UK

The Fees increases are minimal except for things like Highlighted Items or Featured in Gallery etc. which not many people use anyway. This, for me, is the BEST Internet Auction site and I will continue to use it. Nothing else compares with it! If you sell an item for 100 at a land auction house, you will pay roughly 20 in fees. On eBay, cost is about 6 and it reaches such a vast audience - Worldwide! All the "moaners, whingers, defectors" will soon come running back when they realsie their items aren't selling or getting good enough prices on the other auction sites.
Lizzie, England

I shall still buy and sell on ebay but I shall use other FREE sites more.
K.Halbert, UK

I have been buying on Ebay for years and have also made a sale but the idea of the online auction site is to buy and sell "bargains" - any additional charges will simply increase prices and many people will revert to the high streets to SAVE money !!!! Not what Ebay is all about! Will someone please tell the EU that the UK is still an island.
Christine, UK

I don't consider it a problem - it's a question of supply and demand, and market forces. If you're selling an item, the easiest way to recoup the extra listing fee is to increase your initial bid price, or to add extra onto the price you charge for P&P to your buyer.
David Parker, UK

This will add more to the troubled e-commerce sector. EU and other countries should take measures to support and promote e-commerce instead of making it more difficult and expensive by imposing taxes. However, Ebay's plan to increase its subscription fee will even worsen the effect because demand seems to be highly elastic and results will be disastrous, maybe another failure of a DOT COM.
Anwar Ahmed Khan, Pakistan

Previously, eBay was better than selling in a local newspaper because a larger audience meant that an item for sale usually fetched a higher price. Now eBay plan to charge listing fees, final valuation fees AND V.A.T. at 17.5% on top of this, they have lost their competitive edge against a free service such as LOOT. They may not be worth the extra couple of pounds made in a sale anymore.
Mark Houghton, England

I've been using Ebay for years. But there are far more options out there now. Higher prices mean I go elsewhere!
Gary, UK

It's a pity Yahoo.co.uk auctions sold out its members. That was a well run auction site that didnt charge fees. Hopefully, this will have a positive impact on some of the other free auction sites that are out there.
Mark B (Rotherham), UK

eBay charges for the listing as well as a final value commission and then if you decide to use paypal they charge a percentage there too. All in all they make a good hefty percentage and I think they should be careful.. Charge too much and I as well as others will look elsewhere.
N. Bashir, UK

Even though ebay could absorb the costs, I as a seller will continue to use ebay. Who can argue about a 5 listing which reaches a Global audience! Fair price to me..
mark cooper, uk

It will be great if this happens. Traditional Retailers have to pay VAT, Premises Rent and all Local Taxes. Internet companies just avoid this, so they can make more profits. I am quite happy with the new European Law, it will help Traditional Traders.
Conan York, UK

Why should we pay VAT on second hand "BARGAIN" items?? I won't be using E-bay when the new rules come into effect.
Cas, UK

eBay UK manager Douglas McCallum
"Ultimately...because it is a cost of doing business it will be passed through to our buyers"

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