6 - VAT makes UK prices look artificially high

Posted on 12 Jul 2007 at 11:15

Verdict: <strong>True</strong>

One of the few points that stand up is the case of VAT, a hidden cost that's included in prices advertised in the UK, but which is added to prices shown States-side. So software that's advertised at $150 could actually cost $160 with after-sales taxes. "It's the hidden taxes such as VAT that have an impact," says Pentecoste. "It makes things in the US look cheaper than they are, but even so it isn't 17.5% [which we pay here] once you've included sales tax."

US sales tax rates are decided on a state-by-state basis, with some states such as Alaska and Montana charging nothing, and 7% being the highest rate charged. Nationwide, the US average is 5.5% added to the price at the checkout, according to the Federation of Tax Inspectors.

Take that 5.5% sales tax away from the 17.5% VAT we pay, and in one fell swoop VAT can justify around 11% of the difference between UK and US prices. There's plenty left...

Back to 'Rip-off Britain: excuses exposed'.

Author: Stewart Mitchell