In February I published a post setting out the implications of Patreon’s refusal to comply with #VATMOSS. I didn’t set out to hit a nerve, but a week later it went viral. At one point it was getting 1000 visits every five minutes. I’d never seen anything like it.
It now appears that Patreon have caved in to public pressure. On 4 March they published this announcement:
Creators and patrons! I’m Chelsea with Ops at Patreon. I am working on our VAT research and solution. Thank you, again, for your patience. Here’s a quick VAT update: Good news! Patreon will handle the collection, filing, and remittance of VAT payments on behalf of our creators. The cost of VAT will be carried by EU patrons. As always, thank you for your patience and feedback. Patreon has your #vatmess covered so you can do what you do best: create.
Pardon me if I am not swooning with grateful admiration at Patreon’s change of heart.
There are a few takeaways to learn from how Patreon bungled this situation:
1. Good consultants and bad consultants
There are two kinds of consultants in this world. When I go into a consultancy situation I examine the evidence, listen to what everyone has to say, and then I tell them the truth. If it makes them uncomfortable, if it makes them unhappy, if it puts noses out of joint, tough. I’m not there to be liked, nor am I there to help them “spend the budget because we have to spend the budget.”
Then, of course, there are other consultants who send an invoice greater than my annual income and then tell the client what they want to hear. They look at the evidence and then creatively rearrange it to tell the story that the client has already decided is happening. The truth about what is actually happening is neither here nor there; the client is looking for external validation, not home truths.
Patreon hired a consultancy firm whose global reputation is providing the latter. You don’t hire PWC because you want to get to grips with a dilemma. You hire PWC to tell you what you want to hear.
What then happens, of course, is that having spent five or six figures on bad advice written on a napkin, the company thinks they have to stick by that advice and the consultants who gave it. Which they did.
2. Familiarity breeds contempt
I have been deeply unimpressed by the overfamiliar tone that Patreon uses in its public communications.
“I’m Chelsea with Ops”
“After a deep and time intensive preliminary analysis”
While it’s true that a lot of Creators use Patreon for side income, there are others who rely on it to pay the bills. All of them are exposed to VATMOSS, and all of them were exposed to legal liability because of Patreon’s stance. So it’s frustrating to see Patreon communicating in a tone that suggests that their corporate headquarters is a fort made out of sofa cushions. This isn’t child’s play and it’s not a game, and talking down to current and potential users at their time of need is just patronising. (I hereby dub overfamiliar communications in crisis “Patreonising”.)
3. Reciprocity has begun.
Part of the frustration of observing and writing about #VATMOSS has been the nauseating hypocrisy coming out of the United States about it. The US has imposed a global extraterritorial tax law (FATCA) on every country and bank in the world. It was not optional, and was enacted at metaphorical gunpoint. It has cost the world’s financial institutions billions of pounds in compliance costs, compels half the world to act as IRS enforcement agents, and is devastating the personal lives and well-being of millions of people around the globe (including, at some inevitable point, me and my family).
The carrot offered with that law was reciprocity: essentially the idea that if you are collecting taxes for us, we will collect taxes for you. So now picture this: having had no choice but to go through FATCA compliance, the world watches Americans going apoplectic at the notion of having to comply with, and pay taxes for, other countries’ tax laws, over tax sums that wouldn’t pay for a cup of tea perked in the waters of Boston Harbor (yes, I’ve even seen that referenced in this debate.) My American mother used to say that the definition of a playground bully is someone who can dish it out, but can’t take it. She was a wise woman.
Patreon’s agreement to comply with VATMOSS can be seen as an early step towards reciprocity in global extraterritorial taxation. The message to the US is clear: if you’re going to bully the world into dancing to your tune, don’t cry victim when it’s done to you.