If Envato were to pay the withholding tax for authors, then there would be quite a few instances where they wouldn’t only not make money on an authors sales… but they would be losing money, every time an item of theirs was sold.
$7 to the Elite Author.
$3 to Envato.
Author pays $2.40 in withholding tax. Adjusted income: $4.40
Envato pays $1.20 in corporation tax*. Adjusted income: $1.80
If Envato pays withholding tax for the author, as well as their own taxes, their earnings would be: $-0.60
So if you ignore whatever the regular costs are for handling sales, payments, hosting and reviewing items etc… Envato would lose 60 cents every time that individual gets a sale. That’s worse than ‘not easy to swallow’. Unfortunately, you can’t swap and change taxes between people… If they started paying author’s withholding tax, then that doesn’t mean they’d get a free pass when it comes to their obligation to pay corporation tax.
*Not sure the rate Envato pay as I’m not sure if they’re paying US corporation tax or AUS corporation tax, or a combination of the both… but have based the rate on the 40% rate in Utah where they seem to be operating.