Re: [registrars] Regarding taxes

[Larry Erlich <erlich@xxxxxxxxxxxxxxxxxx>]

Bruce Tonkin wrote:
> 
> Hello Rick,
> 
> >
> > There is lots of literature on what happens to markets and
> > the poor with regressive taxes, "flat taxes" have the allure
> > of fairness which is why the rich rarely support them.
> 
> On the subject of taxes, there are two main types that I know of:
> 
> Income tax on an individual or company
> - as I understand it, the tax is on the profit (ie revenue minus
> expenses earning that revenue)
> 
> Value-added tax
> - as I understand it, it is charged on the retail price
> 
> Neither tax is related to the number of goods sold.
> 
> In Australia, Melbourne IT pays a tax to the Government on our profit,
> and we also pay 10% of our retail price to Australian customers to the
> Government as a value-added tax (which is applied to all goods and
> services) on behalf of our retail customers (ie we act as a collection
> agency).
> 
> Whenever we change the retail price, we change the amount we pay the
> Government.  Whenever our profit changes (which has not been in
> proportion to domain name volumes over the last few years), our tax to
> the Government changes.
> 
> I would have no problem with ICANN charging using either of those two
> methods
> - ie a percentage of profit from selling gtld names
> - or a percentage of the retail sales price per name

Not sure that this could be done.
How could you determine the "selling" price for a name,
or the profit, for registrars who give the name away for free
and charge for another service? Or who register names for
their own account or register names for another purpose.
For example, say the University of Pennsylvania decides to become
a registrar and provide all of their students with
their own domain names?

> 
> The ICANN model of a per transaction fee is only equitable under an
> environment where we are all charging the same retail price and our
> costs are similar  (ie our per domain name profit is similar).  This is
> clearly not the case, otherwise we would clearly be sales agents for the
> registry.
> 
> I don't disagree that the increase in ICANN fees will affect a small
> registrar, but it should be understood that the increase in transaction
> fee (from 18 cents to 25 cents) significantly affects large registrars
> that sell a large volume of names at a small or even negative margin.

That is a business choice that they have made. If their costs
go up they need to reevaluate that choice. That is not the same as
a small registrar having to pay quad the fees.

> The increase in transaction fee cost could result in some companies with
> large number of names leaving the industry.   The real measure is
> whether a small or large company is making a profit after the increase
> in ICANN fees, as to whether they will continue in the industry.  This
> is not directly related to the number of transactions.

Setting a per registrar fee of $19,000 (plus) is a barrier
to entry and a business killer to small registrars.

Setting a per domain fee of even .50c is a "cost of doing
business". I see them differently. 

The only way that the increase in transaction fees will kill
a large registrar is if they have contracts with customers that
specify their cost will always be, say $6.50 (or whatever). 

Another example of a registrar that might need to eat
the fee might be Godaddy. The site advertises $7.95 and $8.95
for transfers/new registrations. If a per domain fee of .25 is
added, they can't maintain those prices and those magic numbers.

I think that if a registrar makes a choice to sell domains so close
to the cost, then take a risk if fees are increased. That is a risk
of the business model they have chosen. It is not the same
as, once again, a small registrar being hit with an extra $19,000.

I think it would be entirely reasonable for a registrar to think
that fees could increase slightly on a per domain basis and that
they would need to increase what they charge to customers as a result.
I think it is unreasonable to think that registrar fees could go from
$6000 to over $20,000 per year.

Larry Erlich


> 
> The bottom line is that there is an large overall increase in fees for
> registrars as a whole, and nobody  (big or small) is happy with the
> increase they have to pay individually.


> 
> Regards,
> Bruce

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Larry Erlich - DomainRegistry.com, Inc.
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