BREXIT AND BOARDGAMES
by Selwyn Ward
After much huffing and puffing, January 2021 finally saw the end of the ‘transition period’ of Brexit – Britain’s withdrawal from the European Union. Some view Brexit as the rejection of an overweening centralised bureaucracy. Others see it in terms akin to the secession of the Confederacy from the USA. Whatever your point of view, the debate is now over and Brexit is here. Britain is no longer part of the European Union, the European ‘Single Market’ or the European ‘Customs Union’. But, let’s be specific, what does Brexit mean for board gamers?
For starters, the whole protracted Brexit process initially took its toll on exchange rates. The pound dropped sharply against the Euro and the US dollar. The vast majority of the board games bought in the United Kingdom (UK) are manufactured abroad (mostly in China) and most originate from publishers in the USA or continental Europe. Distributors were quick to increase prices to reflect the fall in the value of the pound. Curiously, exchange rate fluctuations always seem to be a one-way bet: the pound has recovered much lost ground in recent months, particularly in relation to the US dollar, but distributors have yet to reflect this in lower UK prices. Board games are a commodity where pricing has more to do with what the market will bear rather than intrinsic value or the cost of production; if UK consumers have shown they were prepared to pay more then there’s little reason to ever lower prices even when costs fall.
The end of the Customs Union with the UK has meant increased paperwork importing and exporting goods – games included – between the UK and European Union (EU). Some of this is undoubtedly tit-for-tat bloody mindedness: officials being deliberately and unnecessarily obstructive. Bureaucrats on both sides of the border now demand paperwork and certification that wasn’t required before and for which there is probably no practical need now. But some of the difficulties are exaggerated. For sure, last year when I sent a game off to a friend in Germany or the Netherlands, I simply had to box it up and stick on the stamps for the postage. Now I have additionally to fill in a ‘customs declaration form’. However, that’s barely an inconvenience: a small form (around 4 x 3 inches) that you stick on the parcel and which merely asks you to state the value of the contents. It’s additional bureaucracy but it’s a very simple form that takes only a few seconds to complete.
You may have heard stories tho’ of huge difficulties. Of Kickstarters whose fulfilment to backers has been held up because of customs charges and courier shenanigans. Are these apocryphal tales? Sadly no, but they don’t really have anything specifically to do with Brexit…
Coincidental with the January end to Britain’s ‘transition’ out of the EU, both the UK and EU toughened up their rules on the way Value Added Tax (VAT) is levied. VAT is a tax that is paid and reclaimed on most products throughout the production process. If I manufacture a product, I pay VAT on all the components I use and I levy VAT on my sales. I recover (offset) the VAT I pay, so ultimately, after much to and fro bookkeeping, it is only the end-user (in our case, the board game buyer) who actually ends up paying the tax. VAT rates vary between countries and, to some extent, between types of goods, but in the UK the VAT on most items, including board games, is 20%. That hasn’t changed with Brexit.
In the past, some publishers selling through crowdfunding sites have managed to reduce their VAT bill by declaring for tax a lower value than the amount actually paid by the customer – valuing the game, for example, as the marginal cost of its production. As an example, a manufacturer publishing a game with lots of cool minis for which backers were charged $100 might declare the value as a notional $10. Instead of paying $20 VAT, this would give rise to a VAT bill of just $2. Publishers have justified this by quoting the ‘Kickstarter is not a store’ maxim – arguing that backers who use crowdfunding sites aren’t buying games, they are getting them as rewards or gifts for their support. No one seriously believes this claim. Crowdfunding platforms are blatantly used by even quite large publishers as pre-order sites: lucrative for the publisher because they get to cut out the substantial slices of pie usually taken by distributors and retailers and they have the added bonus of payment in full up front – often many months or even years before the game is actually produced. Now customs officials in both the UK and EU have gotten wise to this practice and are insisting these transactions are treated as sales, with the VAT levied on the price paid by customers, including the cost of shipping.
Unsurprisingly, this has resulted in some big bills. The authorities would argue that nothing has changed; they’ve just toughened up on their enforcement. Some publishers have accepted this, acknowledged that their business model should properly reflect the tax due and are funding the VAT out of the money they raised. Others are passing the bill on as an extra – adding it in when they invoice for shipping. The shipping and tax combined can tot up to an eye-watering sum – sometimes seeming to double the original headline figure in the crowdfunding campaign! Even more controversially, some backers are being confronted with tax demands from the courier delivering their game. Where this happens, the courier often adds on their own administration or “handling fee” – typically charging the equivalent of another $15 on top of whatever tax is being claimed. On one recent Kickstarter originating in Poland, there was an extensive dispute between the publisher and the courier (UPS) over whether or not the VAT had already been paid by the publisher (it had) – with UK backers being confronted by deliverymen holding their games to ransom and refusing to hand them over till they had exacted their fees. The publisher offered to refund backers but the dispute between them and the courier still rumbles on.
If you’re reading this in the USA, you may be puzzled by all of this. You will be used to paying a different price at the till to the one printed on the label. State and city sales taxes are akin to VAT and folk in the US are accustomed to the tax being billed as an extra. That isn’t the norm, however, in the UK or Europe, where legislation requires that the prices advertised to consumers are the prices they are expected to pay. If I opened a retail board game store in my local high street, I would be breaking the law if I marked all the games with a price exclusive of VAT and then added 20% at the checkout. European consumers, therefore, expect the prices they are quoted in crowdfunding campaigns to be inclusive of all taxes – especially when the campaign has borne an ‘EU-friendly’ sticker.
Crowdfunding – especially Kickstarter – has transformed board game publishing over the past decade. It’s enabled first-time publishers to bring to fruition board game projects that would otherwise never have seen the light of day. For established publishers, it’s offered a lucrative alternative business model that has enabled them to thrive. But it’s still a Wild West environment. There have been cowboys and some out-and-out bandits using the platforms to steal from backers; and the crowdfunding platforms, who have already creamed their cut off the top, offer little or no protection to backers who find that they have been the victims of fraud. Disputes over misleading pricing and the meaning of “EU-friendly” notices further undermine confidence. It may be premature to call this the end of the board game boom on Kickstarter but backers in the UK and Europe are certainly showing signs of falling out of love with the crowdfunding model – and it’s not because of Brexit. – – – – Selwyn Ward
Selwyn Ward edits Board’s Eye View (www.facebook.com/boardseye and www.boardseyeview.net). As a Kickstarter ‘Superbacker’, he has backed a shocking total of 533 projects to date! He describes himself as a recovering addict, having now gone 11 days since he last backed a game on KS.
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