EBay to pay tax man in Europe, dent in sales looms
6/5/2003 10:10:40 AM
By Bernhard Warner, European Internet Correspondent
LONDON, June 5 (Reuters) - Online auctioneer eBay Inc. (EBAY) said on Thursday it would begin charging its legion of sellers value added tax (VAT) to comply with a new EU law, risking sales growth at one of its best performing units.
The move will end a tax break that turned its European operation into one of its fastest growing businesses.
New EU legislation requires all Internet firms operating in Western Europe to charge VAT on all services and products sold from their sites, a move aimed at levelling the playing field between overseas companies and their VAT-paying European rivals.
Beginning July 1, eBay, the profitable Internet auction site, will restructure the fees it charges sellers who sell their wares on its nine national European Web sites.
From that date, seller fees, which amount to up to five percent of the final sale price, will be inclusive of VAT.
"Within the EU we are now obliged to charge VAT," said Michael van Swaaij, vice president of eBay Europe told Reuters. "Now, the EU is going to get its cut."
VAT rates vary across Europe, ranging as high as 17.5 percent in the UK and 25 percent in Sweden. The VAT rate is likely to put a noticeable dent in the auctioneers' European revenue base.
To offset the potential loss in revenue, the company will impose higher selling fees in Britain and Germany, its two largest European markets. In the UK, the listing fee will be raised from five pounds to six pounds ($10).
"We cannot predict exactly what's going to happen with us raising the prices in Germany and the UK. We assume this will have some effect," he added.
The listing fees will not change in its other European units, which include Spain, Italy, France, Belgium, Holland, Austria and Switzerland.
EBay's international unit contributed $137.5 million in revenues, or 29 percent of first quarter 2003 sales, with Europe being among its biggest growth drivers.
Last month, media conglomerate AOL Time Warner (AOL) set up a new business unit in Luxembourg, one of the more VAT-friendly countries, for its Internet unit AOL Europe.
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