I don’t see it that way. I’m self-employed, and when I send the government a big VAT check every other month it certainly feels like I’m the one paying, not my clients.
Yes, but don’t you GET the money (theoretically) from your clients? Where else would the money come from? You *collect *the gummint’s money from your clients and pass it on to the gummint. That portion never was really your money.
All the money I pay for anything, I get from someone else. How is this different?
Look at it this way - who is legally liable if the taxes don’t get paid? Me, or the client?
In the states, the retailer is acting as an agent, collecting the sales taxes that consumers are required to pay. If the retailer does NOT act as an agent for the consumer’s state (let’s say by not being located in that state) the consumer is required to pay the state directly (even though nobody really does)
If they eliminated or doubled the VAT, would you adjust your prices at all? I suspect you would, and most likely in a way to keep your “post VAT” income roughly equivalent. In the States, it’s explicit, in VAT countries, it’s implied.
I remember some of my friends who did a college exchange program (and were under 21) running into the minimum age laws on alcohol and telling us about it on return. I still didn’t really believe that was for real with regards to how strictly it is enforced until I moved to the States myself.
[QUOTE=JohnT]
I think hiding the tax into the overall price is the greater chicanery.
[/QUOTE]
It’s the word “chicanery” that left me boggled. But if you can’t spare a sentence of explanation, that’s fine. (I think I might even understand (and relate it to thread topic. 
))
Martini was the first to use it, and my post you quoted was referencing the word he used. So… ask him what he meant?
I think the idea is that, in Martini’s case, he was implying that a business owner was hiding the true prices from his customers if he didn’t include tax, but in JohnT’s reply, he was implying that the alternative (inclusive pricing) was hiding the true price of government from the taxpayers, which, in his opinion, is worse than having to pay 7% more than you expected at the register.
Personally, I’d like to see a compromise. “Store price + taxes = cost to the customer.” On all price tags. The argument above about rounding applies, too. Quote the rounded tax on the price tag, but actually calculate the sales tax on the total purchase. Win-win.
Because the bulk of your money comes from stuff you have actually worked for. The VAT is just a random percentage you’ve lumped on top of your fees for doing nothing.
Why should you get to keep the money? You’ve done nothing to earn it?
Anyway, presumably, you get the benefit of claiming VAT back off purchases you make for you business. That’s your payback.
Well, I don’t know how you do your pricing, but in the States it is a simple cost+tax. If my widget is 2.99 and the tax is .29, the consumer pays me $3.28, I keep my 2.99 and give the state its .29.
If, on the other hand, your widget is $2.99 and you take the tax out of that amount… then, yes, it’s coming out of your pocket.
When I bill my Texas clients, there’s a line on the form for sales tax. Largest one I collected was over $2k for a $26k project. I still got my $26k, the state got its $2k, and the customer paid me $28k. I don’t consider the $2k “mine”.
Yes, that was the only conclusion I could draw; JohnT’s reluctance to elucidate tends to confirm this.
I wonder if “irrational hatred of government” is another item for the “what’s unique about U.S.A.” list.
Irrational hatred of taxes.
No more than “wanting to know the true price of things.” :rolleyes:
But did your bank consider those $2K yours or your client’s when you deposited and then withdrew it?
See, I’m talking about how things work in practice. I send my accountant two checks, one for income tax and one for VAT. If I fail to send either, I go to jail. In practical terms, how are they any different? Both of them are equally my responsibility. Conversely, when *I *buy something, I’m not responsible for paying the taxes. The seller pays them, he doesn’t pay them, it’s not my problem.
True, if the tax rate goes up, I’ll charge/pay more. But you can also see this as just another expense borne by the consumer - like how your power bill goes up when the price of oil rises.
It’s a matter of perception. I see the sales tax as something the seller pays, and therefore expect it to be included in the price. You consider it something you pay through the seller, and therefore expect it to be added. The end result is the same.
For what it’s worth, Alessan, I see it exactly the way you see it, and I don’t really understand JohnT’s perspective at all. Anyone who lives in a place where sales tax rates might make enough difference in the final price to offset the cost of travel surely knows where those areas are, and what the percentage difference is. How often does anyone make a purchase so large that this is a factor, anyway?
I suspect the perception of getting a bargain is more important than doing the math to see if money is actually saved. I suspect the lower price on the sticker than at the till is all about making people feel that their cost is lower than it is, and so cultural.
Well, I actually have a separate account for sales tax. It’s a bit of a pain, but taxes that I collected don’t go into the general account and therefore don’t mentally become “mine”.
Fortunately, our volume of sales is such that this is pretty easy to do.
In Texas you have the following:
- A state sales tax of 6.5%
- Cities are allowed to tax from 0% to 2%
- Counties are allowed to tax from 0% to 1%
- Special Purpose Districts (schools, libraries, etc) are allowed to tax from 0 to 2%
- Transit Authorities are allowed to tax from 0 to 1%
So in this state alone, your sales tax can range from 6.5% to 12.5%. Were the spread 1%, I’d might agree with you, but it’s not. The differences in rates vary wildly and do make a difference - the taxes alone can make a one place 5% more expensive to live than another 20 miles away. Doesn’t that matter, especially given the regressive nature of sales taxes?
Sure, if you’re buying a house or picking out an apartment. If you’re going grocery shopping, the cost of driving 20 miles out of your way probably offsets it, or at least makes it negligible.
But you are presuming that someone living there doesn’t know what the rates are until he or she gets into the store, and then DOES find out before making the purchase. That is false. Stores don’t tell you what the post-tax rate is until you pay. So if you want to factor the rate into your shopping, you still have to do the research on your own, and the price tags are irrelevant.
And, so?
In an all-inclusive pricing model, adapted to the US’s splintered government, you’d still have to do research in order to save $ on taxes. I’m not seeing the advantage, at least in “research time”, especially if I have to back the taxes out of the price in order to get the true cost of the item.
For example, if I buy a truck I look at two dealerships. They both have Ford F-150s for $30k. But one is in the SA city limits and the other is outside, making a 2% swing in taxes (or $600.) To get this information, yes, I have to learn the tax rate… but that’s not hard for a person capable of shelling out $30k for a vehicle, right?
On the other hand, with the all inclusive pricing I’m looking at one vehicle for $32,400 and another for $33,000. I have to now find out the tax rates in both counties, try to back the taxes out of the prices, merely to find out that the cars are priced similarly. How is that mathematically and conceptually easier than simply multiplying .08 and .1 by the base price?
(Also, the assumption that one has to go 20 miles out of your way isn’t true. If I go up to the next highway exit (a mile), I save 1.75% on my taxes.)
I don’t think it’s an irrational hatred of government, any more than the alternative (calling it “chicanery” when businesses don’t put tax on their price tags) entails an irrational hatred of shop owners. In both cases it’s a matter of deciding what information you think is important to show up front. The US and NZ have come to opposite, but, IMO, equally reasonable, conclusions there.
As I said, I’d personally like to see both prices up front, separately, on the tags. Is there any place this is regularly done?