Happy Early Tax Day (April 15th)!
April 15th. The anti-July 4th. The day the US government penalizes its citizens for earning a living, investing our money, and taking out all-interest tax-deductible mortgages that a growing number of Americans (not us) cannot afford.
Poor incentive structures aside, the American tax system simply crescendos on April 15th. But its heart beats everyday with payroll deductions, fuel charges, sin taxes, and the so-common-you-don’t-notice-it-anymore sales tax – the focus of my remarks today.
The marketing folks in EU tax-land learned wisely from the great branding minds of Europe (Gucci, BMW, Nokia) and pulled off a double duping of their citizens regarding ‘sales taxes’. Like all great brands, they started with a great name – the euphemism ‘value added tax’ (VAT). The finale is the VAT’s cloak of invisibility as a hidden portion of every final item price, rather than as an added line-item amount at check-out (like sales-tax in America). So, not only do Europeans hear that they are ‘adding value’, they actually never see the VAT at all. Brilliant!
I applaud the effort for added consumer convenience of a transparent price rather than calculating 8.75% +19.99 while shopping. But I am quite sure that consumers would trade some inconvenience for not paying 17.5% on every purchase (that’s the VAT in the UK). Check your wallets carefully on the continent because the VAT in France and Italy is closer to 19.5%.
As a proud believer in arbitrage as a great equalizer, I invite all Europeans to learn about real value and buy your BMWs in the US. With the ‘valued’ tax you save, you can buy a Gucci purse. Or go to Oregon (no sales tax) and have two.
