Thursday, September 10, 2020

A Look Into The EVE Online Price Increase For UK Players

Last week CCP announced a price increase for players paying in pound sterling.

On 5 October 2020, there will be an update to the pricing of all Omega and Skill Extractor products for players paying using the Pound Sterling (GBP). This is being done in order to bring GBP prices in line with other main currencies (USD/EUR). Active Omega subscriptions will also be affected, and will update automatically after 5 October.

The main reason for the price change is that changes in currency conversion over the past few years have created an imbalance between the pricing in GBP, USD and EUR.

Furthermore, the prices have not changed since 2014, so these must be updated in order to maintain relative consistency across EVE Online's many markets.

Since the announcement, one nagging question stayed in the back of my mind. Why not also update the prices of PLEX?  Then the reason hit me: low value consignment relief.

In May 2012, players in the UK could begin paying for their subscriptions and other purchases in pound sterling instead of euros. At Fanfest 2012, CCP mentioned something about new laws that would allow the company to lower the subscription price for UK players, but not the real world cost of PLEX. The law in question regarded low value consignment relief. At the time, I wrote about the subject:

Even after the pricing change CCP collects more after taxes from U.K. players than from any other country.  How can this be?  The European Union has a regulation called low value consignment relief.  While for most of Europe the amount is €10, in the U.K. any import from a non-EU country like Iceland with a value of £15 or less is exempt from the normal 20% VAT that domestic companies must pay.

By lowering the price of a subscription in the UK, CCP no longer had to collect the 20% value added tax (VAT) on a subscription. However, CCP couldn't lower the price enough to avoid paying VAT on PLEX sales. I believe that was due to the upper limit of €22 on items affected by the rule. With the strength of the pound sterling during the Eurozone debt crisis, the exchange rate could change enough for PLEX to exceed that amount.

Subscription price change for UK, starting 5 Oct 2020

The days of tax avoidance are ending. On 20 July, Her Majesty's Revenue & Customs department published a paper describing how VAT from overseas sales will change in 2021
For imports of goods from outside the UK in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), we will be moving the point at which VAT is collected from the point of importation to the point of sale. This will mean that UK supply VAT, rather than import VAT, will be due on these consignments.

The new arrangements will also involve the abolition of Low Value Consignment Relief, which relieves import VAT on consignments of goods valued at £15 or less.
Or, in other words, CCP needs to increase the price of the two items that are VAT-free for UK players, the 1-month of Omega time and the single skill extractor. The price of a month of Omega time is increasing 20%, from £9.99 to £11.99. The price of a single extractor is increasing by 25%, from £3.99 to £4.99.

The remainder of the prices for both Omega time and skill extractors were increased to levels near what is charged in US dollars. For example, using the exchange rate listed by Morningstar for 10 September, the new £99.99 price of a year's subscription in the UK is $128.02 USD, or $3 less than what those paying in US currency pay. The current rate of £89.99 equates to $115.22, or $16 less than the US price.

Price of PLEX on Amazon.co.uk, 10 September 2020

Perhaps not surprisingly, PLEX, an item which last had its price adjusted in 2017, is not seeing a price change. The price remains comparable to the US dollar amount, if a bit higher. For instance, the price of PLEX on Amazon.co.uk converts to $43.54, or $3.55 more than the price on Amazon.com.

I also wondered why the prices in the UK were not adjusted in July at the same time CCP increased prices in Russia. I tried to think of any other reasons besides the VAT change that potentially sparked the re-evaluation of pricing in the UK. The date the change takes affect, 5 October, is the first full week of the fourth quarter, but since Pearl Abyss' fiscal year ends on 31 December, the beginning of a new fiscal year is not a reason. I also could not find any evidence of a similar price increase for UK players in Black Desert Online. The closest I could come is that the sale of CCP to Pearl Abyss became final in October 2018. 

Perhaps the simplest explanation is best. CCP was prodded to look at pricing in the UK due to the elimination of low value consignment relief. Whoever is in charge of the pricing looked, realized they could raise the prices on certain items and did so. That the company doesn't have to start paying VAT until January just gives the fourth quarter numbers a minor boost that could help make CCP's books look a little better at the end of the year.

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