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Cake day: April 13th, 2024
  • Kazumara@discuss.tchncs.detoGames@lemmy.world•Why are games priced in € (EUR) the same as $ (USD)?English
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    13 days ago

    It depends on the tax system, Europe and North America have it work differently.

    When I buy supplies in Europe for the (Swiss) company I work for I often get the B2B website that does not display the VAT, but then in the final checkout step and on the invoice the VAT is definitely there.

    I’ll try to explain the differences the best I know them:

    In Europe everyone along the value creation chain pays the VAT to their suppliers and collect the VAT from their consumers, and in the end only the collected tax minus the tax paid out to suppliers goes to the government. So in effect everyone pay the tax on their part of the value creation.

    (Example: You buy inputs for 100€ and pay an additional 10% tax (10€) to suppliers. You turn them into products worth 500€ and when selling them collect an additional 10% tax (50€) from buyers. Then you send 50 - 10 = 40€ to the government, which is also 10% of the 400€ value you created. The other 10€ reach the government from your suppliers and their suppliers)

    In the USA the sales tax is only charged on the final sale as it goes to the consumer market. As long as you can prove you aren’t a final consumer you don’t pay the sales tax.

    (Example: You buy inputs for $100 and pay no tax since you are not an end customer. You turn them into products worth $500 and when selling them to end customers you collect an additional 10% tax ($50). The entire $50 goes from you to the government.)

    The economic effect should be roughly identical, but one system could be easer to game, the other more complex to administer.

    Edit: Another thought, maybe the European System makes it easier for the EU because the revenues are automaticually distributed fairly according to where the value creation happened in an integrated economy system with multiple countries.