North Americans and tax
North Americans, as a general rule, really don’t like tax. In fact, if you allowed a significant number of loonbags on the shouty fringe of the Republican party to have their way, there would be no taxation at all – let’s face it, we don’t need those vile evolution-preaching schools and law can be sorted by allowing everyone to carry 14 fully loaded guns around.
Unfortunately, this attitude towards taxation means that Americans and Canadians like to draw attention to this fiendish imposition by writing ‘plus tax’ everywhere. And for the uninitiated visitor, this gets hugely, hugely annoying.
Tax rates
As a general rule, everything is priced without tax included. So, unless you know the exact tax rate in the state or province you’re in for the particular thing you’re buying, you end up with a seemingly random amount tagged on the bill at the end.
This is a system that benefits absolutely no-one. Saying something costs X amount ‘plus tax’ doesn’t help the consumer at all. They want to know how much they’re going to pay, not what proportion of it goes to the government. I’m well aware that each state and province has different taxes, but I can’t think of a single instance where you buy a product in more than one state. If you’re buying a can of Coke in Nevada, then on the only things that matter are the taxes applicable to cans of Coke in that part of Nevada. Similarly, if you’re paying for a hotel room in Vancouver, what tax rates are anywhere else is pretty much irrelevant.
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People, as a rule, want to know how much they’re paying. In a shop, they’ll perhaps like to get the exact change ready before waiting for the items to be rung through the till and totted up – it’s more efficient for everyone. If paying for a tour by cash, they want to know how much cash they’ll have to bring with them, rather than having to guess. Yet they’re presented with ‘plus tax’ and haven’t the faintest idea what that might be.
“$210 plus tax”
I just can’t see who this benefits. Retailers have to separate the tax anyway when they pay the bill, so it doesn’t really matter if it’s done before or after the transaction. And surely even locals can’t be expected to go round with the different tax rates for everything stashed in their head? It’s not simple, either. I asked one at one hotel in Montreal what the price of a room was. The response was “$210 plus tax”.
“And how much including tax?”
The woman had to get her calculator out. “Well, it’s 3% lodging tax – that just goes on the room rate, and 5% GST. Then there’s 8% QST, which taxes the tax as well.” What the hell? Not even people who have to apply the tax to the price on a daily basis know what the exact percentage rate of total tax is. This is outright lunacy.
North American friends: the concept of quoting prices inclusive of tax isn’t some kind of dangerous European idea that’s trying to take your freedom away. It’s not socialism. It’s not trying to jump on the grave of Ronald Reagan, tear up your precious flag or smash up your apple pies. It’s just plain common sense that benefits everyone.
If you insist on keeping things separate, then saying X amount plus Y amount of tax is a much fairer and more helpful way of stating the price. At least people then know which two sums to add together to get the real cost. The current way – X (plus tax in small letters) is just rubbish from every conceivable perspective.
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David, this is certainly not a North American problem, especially when you’re talking about hotels and rental cars. I’ve reviewed hotels in a couple dozen countries in the past two years and can count the ones where tax was included on one hand.
Plus it’s not just states that have different taxes, but each city can have slightly different ones as well. (You’ll pay more in Manhattan than you will in Albany.)
In tiny European countries with one centralized finance system it’s easy to have a simple flat tax rate that’s included in the price. In a decentralized one one states have lots of sway, it’s easier to tack it on. Besides, most Americans don’t need to have exact change ready because they pay with a debit card. Have you really noticed slower lines than at home? We just assume it’ll be 10% or so more for tax and if it’s less, a bonus. Prices are still so much lower than in Europe regardless.
I realise that you’ll pay more in Manhattan than Albany. But I also realise that you’re only buying something in one of them at any one time.
Whether it’s centralised or not, is irrelevant, the tax rate still has to be applied at point of sale anyway, so why not include it in the price? The sums still have to be done – why not do it sooner rather than later?
I also know this happens in other countries too – mainly on the American continent, following big brother’s lead. What I can’t understand is why anyone could possibly think this is a better system. It’s just not. Instead of guessing at 10% or more then having a nice bonus if it’s less, surely eliminating the pointless guesswork from the whole process is better?
As for “Prices are still so much lower than in Europe regardless. “That’s a complete myth – certainly once taxes and (pretty much obligatory) tips are added. Sure, a meal in San Fran might be cheaper than in Geneva, but it’ll also be more expensive than an equivalent one in Lisbon. But the whole US cheaper to eat out in thing is a myth created by pricing sleight of hand. The stated price may be cheaper, but you have to whack on another 25 to 30%.
I’ve always suspected the main point of the ‘plus tax’ thing is that the retailer can pretend the product or service is cheaper than it actually is by having a lower headline price (as it’s called).
A year or two ago such component pricing was made illegal in Australia, mostly because it was being abused all over the place. Particularly in travel, where a travel agent would invent a much larger ‘plus tax’ amount than was needed in order to lower the headline price. For example, a trip might cost $250 + $49 taxes, so the agent would advertise it as $199 (+ $100 taxes in tiny print). Very annoying and unethical.
It also had the excellent effect of making it illegal for restaurants to tack on surcharges for public holidays or Sundays, notified in very small type somewhere you’d never notice it. Now they have to have the same price every day or print a separate Sunday menu with higher prices that the consumer can actually notice.
IMO, including taxes in the price is both convenient, and more ethical behaviour toward consumers.
Hear hear! It’s blooming ridiculous to have to keep putting your hand in your pocket for more change. I bitch about this every time I buy something in Canada. The price on the label should be the price you pay. Otherwise, it’s just inconvenient! And more time-consuming to boot.
Entirely in agreement. Concealing the final price-to-pay from the purchaser is tantamount to deception.
However we’re somewhat cosseted in the ‘West’ because almost everything we buy has a price – that is, the businessperson has worked out the cost price plus overheads plus margin etc etc behind the scenes and devised a notional figure they believe the market will tolerate. In most of the rest of the world, nothing has a price – the only price is what the next customer is prepared to pay. Hence haggling.
The only advantage to “plus tax” is in places like Jordan, when hotels frequently advertise rooms at (e.g.) 50JD++ – that is, the price of the room “plus-plus”, which means plus government tax plus mandatory service charge imposed by all hotels rated three-star or higher. If you demur, or ask nicely and quietly if there’s a cheaper room or perhaps some less complicated way of doing things, on-the-ball hoteliers will instantly knock off the “plus-plus”, and throw in breakfast as well.
Tax as wiggle-room – try that in Manhattan.
No one ANYWHERE has any excuse for not putting the price you pay on an item. Here in Japan it can be a pain in the ass going to a travel agent and getting a straight price, but elsewhere it’s not so bad – in the supermarket there are two prices for everything, the one before tax and the one you pay. It’s ridiculous but at least you know you pay the higher price. Also,there’s no tipping so restaurants, bars etc are a cinch. How anyone could try to justify not putting the full price on at all is beyond me. It will never, EVER be more convenient for ANYONE, customer or proprietor or shop keeper or waiter or whoever, to only display the price before tax. It’s just dumb.
This is about #1,987 on the list of things Americans and Canadians are bothered about. In the city I live in, the combined state/city sales tax has changed 4 times in 3 years. Can you imagine the hassle if every supermarket had to relabel every item in the store every time that happened? Instead they change a figure in the POS system and it’s done.
And David no way it’s a myth that meals are cheaper in the U.S. Every time I go to England I pay 25-50% more for food, factoring in tax and tip differences too. This is the thing every European backpacker I meet says they love the most about America: bargain meals, big portions, free refills.
David, I’ve had dozens of people from England and Europe staying with me over the years, couchsurfing, and every single one has raved about how much cheaper it is to eat in the U.S., whether buying in the supermarket, getting fast food, or going to a nice restaurant. (Why do you think my countrymen are so fat?) It’s the final price that matters and no way is it a myth that restaurant prices are equal on both sides of the Atlantic unless you’re only eating in midtown Manhattan. Ask any American that’s gone to Europe on vacation lately…
Regardless, this is a decision that’s meant to make it easier for businesses. The consumers don’t care, for the most part, as they’re used to it. It just riles up the foreigners, apparently.
Tim L and Linda: Gosh, those poor supermarkets. As they’re so concerned about changing price labels, I assume they never do so to account for price rises or sales. And if you think the VAT rate in the UK doesn’t change frequently, you’re sadly mistaken – but prices are altered to take it into account.
I’m sure Americans and Canadians are so used to it that they don’t mind. But asked to weigh up the two systems can you honestly say that not including the tax is better? And that’s all I’m saying – it’s a puzzling, flawed system that could and should be improved upon for the benefit of virtually everybody.
And regarding the food thing, maybe three or four years ago when the pound and euro were strong and the dollar was weak, that would be true. But I travel mainly in Europe, and have spent the best part of the last three months in the US and Canada. And when you compare the cost of a like-for-like meal with tax and tips factored in, the price will be roughly the same in the US and Europe.
Sure, a diner meal in Nowheresville might be cheaper than a pub meal in London or Berlin. But a pub meal in Sheffield or Leipzig will also be cheaper than a diner meal in San Francisco or Boston. In an equivalent city and equivalent eatery, a £10 to £20 main course in the UK will be a EUR12 to EUR24 main course in Europe and a $15 to $30 main course in North America.
Americans who have gone on vacation to Europe know where the cheap, good spots are in their home town. They don’t in the city they’re visiting. You’re not making a fair comparison.
I think it’s near impossible to say whether a place is cheaper or not unless you make a direct comparison to the same meal, in the same restaurant chain. In this case, generally speaking, I think the USA is cheaper.
But, and this is a huge BUT. David is spot on with the North American obsession with taxes on top of everything. Bar tips … or do you now need to pay taxes on tips?
What’s worse is, as stated above, the follow the leader antics of other nations that have made this practice widespread.
I had a girl calculating things up the other day, only to ask her if she should add VAT before Service charge or after. Poor thing got a bit flustered.
Just put the full price out on the menu and be done with it, tips and all if you must!
Personally, I found a lot of dining experiences in Canada last year to be more expensive than the Australian equivalent once you added taxes and tips. It certainly wasn’t notably cheaper, though to be fair I wasn’t eating at the cheapest neighbourhood places that locals would know about.
And as someone currently in Poland, I shall now get dutifully peeved at people saying ‘Europe’ when they mean ‘Western Europe’. It’s pretty cheap here, and this is one of the more expensive ex-communist countries.
Re the labelling – every country has added government taxes, and almost every country manages to quote an inclusive price. Can’t be that hard to do.
While I agree that the plus tax thing can get annoying — especially in NYC, where I suspect some hotels just make them up — I don’t think it’s fair to lump Canadians in with Reagan worshiping Neo Cons. Hell, our Conservative party is more left-leaning than the Democrats.
There are at least 5 iPhone apps you can download that will calculate sales tax in each province, if that helps.
Apologies Rose (and, indeed, Canadia). Consider it a justified revenge for Jim Carrey.
Agree completely about the plus tax issue – no need for it, although as others have pointed out, no-one in the US seems bothered by it so it’s really only us foreigners who it offends – and hey, we can offend our visitors too.
As for prices, I think almost everyone finds the place they know best to be cheaper. We spent a year in NYC and were able to eat very good sub $10 meals. I can now take American friends in London to get very good sushi for under £5 and some of the best Indian food for the same; it’s all about knowing where to go. I honestly don’t believe there’s that much between the US and UK in terms of food prices (supermarket or restaurant) when everything’s been paid.
Okay, I guess we deserve some collective punishment for Jim Carrey, not to mention Justin Bieber.