Have a read of this one…
Vir2, a provider of SMS marketing and fundraising solutions for charities, has welcomed the decision by UK politican, Mark Oaten MP to file an Early Day Motion calling upon the Government to stop charging VAT (sales tax) on UK charity donations made by SMS. All other methods of giving to charity are VAT exempt. Premium SMS texts are a particularly useful way of collecting money quickly, but the Government are not treating it the same as other methods.
On the face of it, this sounds like a brilliant idea. I support it.
Vir2 favours a solution of creating “VAT free” short codes that can only be used by registered charities for the purpose of fundraising. The awarding of short codes is already regulated by Ofcom and Phone Pay Plus.
The problem? Well, you’ve got four (or five, depending on your viewpoint) huge, huge multinational companies who are earning massive percentages of their revenue from text messaging. Premium text messaging, in particular, contributes a tidy sum.
The last thing your common-or-garden mobile operator needs is the bright light of a consumer movement demanding tax exemption on donations made by text. Whilst one would have thought the key issue resides with Inland Revenue, I reckon that’s just a sideshow. At 17.5%, it’s a bit part in the huge game of premium text.
The tax is nothing, NOTHING when it comes to looking at the revenue share from premium rate text messaging. Operators are routinely taking 40-50% of premium text revenues citing all sorts of bollocks about ‘keeping the lights on’ and having to manage the billing relationship with the end-user.
The net effect is that when you donate to a charity, let’s say, via a £1.50 text message, a good whack — 30-60 pence of that (depending on exact relationships) goes direct to the operator. This is something that winds up the charity no-end, the aggregator and the service provider. I’ve no doubt that it’s also intensely annoying for the person donating the money when they read the small print (“At least 80p of your 1.50 goes to the charity… the rest goes to the thieving bastards…”)
There’s lots of conversations to be had on the topic. Pluses and minuses all round. I strongly favour operators taking a significantly reduced percentage of all premium rate text message traffic, not just charity donations.
But, as the chaps at Vir2 put forward above, I’d settle for charity shortcodes that are both VAT free — although I’d also like to see much higher payouts nearer the 90% mark, at least for charities.
Read more about Vir2 at www.vir2.co.uk.