Why is everything more expensive in Europe ?

[doc_bean]

Okay, this is something that constantly bothers me when I see a price on the internet in US dollars. Why do we Europeans have to pay so much more than the Americans ? I realize we have more taxes, but sales tax is about 20% here, the Euro is about 40% more 'valuable' than the dollar, so even accounting for the extra taxes and the extra transport costs (well, everything's coming from Asia anyway so it shouldn't be that much more) it still doesn't explain why we have to pay so much more for books, cd's, games and pretty much everything else. It used to be that you just looked at a price in USD and than thought the cost here would be the same figure but then in Euro's. However, lately, this doesn't even apply anymore !

Is it our higher wages ? Does the money go purely to the retailers ? Is there some sort of insidious plan to make us all poor ? Or doesn't the market work like we'd expect it to, at all ?

</rant>

[Duke Malcolm]

Think of us in Britain! We have more expensive stuff than Europe...
People travel to Europe for cheap things...

Taxes, inflation, etc...

[Fragony]

Bigger market so retailers can buy bigger batches. And lower taxes of course

[Louis VI the Fat]

The US has a more inventive enterprising population, a fiercely competititive market, less regulation, more capitalistic incentive
Oustanding European economic accomplishments, leading to a high wage, high prices economy.

[English assassin]

To help keep the Americans at home

Oh, wait, I know this one. Because of the EU.

[caravel]

Think of us in Britain! We have more expensive stuff than Europe...
People travel to Europe for cheap things...

Taxes, inflation, etc...

Too true... it annoys me that people in the US can get broadband for something like $10 per month! In the UK we're paying between £15 - £20 per month which is something like $27 - $36 per month. They also get their games, CD's and DVD alot cheaper, and of course their petrol is cheaper.

[doc_bean]

Personally, i'd like to blame it on two things

1. the complete idiocy of the European consumer

Take for a instance a chain store like Free record shop, which despite its name sells cd's at over 20€ a piece. This chain of stores is ever expanding, despite the fact that those same cd's are often available for 15-16€ in a smaller shop. Those small shops have a hard time surviving, go figure.
Something that really pissed my off were the Fnac stores here once had a 'campaign' to lower the sales tax on cd's: they put little stickers on cd's: with 6% sales tax this cd would only cost blablabla". Ironically, the first time I saw this, I had just been to a different store that sold the same cd at a price below what their lower-tax-price would be... The Fnac chain is doing great afaik.

2. retailer monopolies

I already mentioned two chains, Fnac and Free Record Shop who sell cd's at insane prices yet do well. Of course, there are still some smaller cd stores left that sell them at a lower price, at least in the cities and town where those haven't been bought out by the chains yet. Now games, they're a different matter. Even if you don't live in a big city, your choice of game stores will be pretty limited: besides the two chains mentioned, you have Bart Smit, which is basically a children's store with only limited stock, and Game Mania, yet another chain (overpriced, but less so) and the big convience stores (limited stock of course). there are no independent game shops that i know of, so while there might be some, there won't be many. Now recently, Game Mania has been bought by Free Record Shop, this can only lead to more raping of the average consumer. I've seen a PSP being offered at 300€ in a Free Record Shop, while it was being sold for 250€ a year or so ago. Things aren't looking good...

[Alexanderofmacedon]

I don't know, but have fun paying more.

[solypsist]

all that free healthcare doesnt pay itself.

[doc_bean]

all that free healthcare doesnt pay itself.

No, but already mentioned it couldn't just be due to taxes, unless there are some serious import taxes that I'm unaware off, and I'd really doubt that since that would be money going straight to the EU and no country likes to give them to much without their explicit approval.

[Proletariat]

Too true... it annoys me that people in the US can get broadband for something like $10 per month! In the UK we're paying between £15 - £20 per month which is something like $27 - $36 per month.

I pay $60 a month for cable internet right outside of the nation's capitol, and so does anyone else I've talked to. Where did you hear about $10 a month?

[Pindar]

I pay $60 a month for cable internet right outside of the nation's capitol, and so does anyone else I've talked to. Where did you hear about $10 a month?

My broadband in Orange County CA is $22 a month.

[Proletariat]

Hm, between your gas prices and mine it may be a wash, though.

[Pindar]

Hm, between your gas prices and mine it may be a wash, though.

The trick is to get your office to pay. Most people I know have gas cards from their offices.

[Proletariat]

Come to think of it, my company has paid for my gas as long as I've been there. The clincher though, what's a pack of cigarettes go for in Orange?

[Pindar]

Come to think of it, my company has paid for my gas as long as I've been there. The clincher though, what's a pack of cigarettes go for in Orange?

Ahh, there you stumped me. I don't smoke. I haven't a clue. I just asked my assistant, but she doesn't smoke either. I think the price depends on how tall you are.

[Blodrast]

all that free healthcare doesnt pay itself.

Hmm, but Canada has free healthcare and yet the prices are not the same as in Europe...so I don't really see how that can be the cause.

[Vladimir]

I believe that "sales tax" of 20% mentioned earlier was referring to a Value Added Tax (at least in the UK). That's where something is taxed at EVERY level of development. From oil pumped out of the ground, to molded plastic, to finished item. It's not 20% sales tax, it's 20% + 20% +20%...

[doc_bean]

I believe that "sales tax" of 20% mentioned earlier was referring to a Value Added Tax (at least in the UK). That's where something is taxed at EVERY level of development. From oil pumped out of the ground, to molded plastic, to finished item. It's not 20% sales tax, it's 20% + 20% +20%...

Errr... I worked in a bar, we could buy are beer tax free and had to pay taxes on what we sold, as a percentage of the price we sold it at. That's mostly how it works I believe, tax is only calculated on the end price of the finished product. Otherwise how could a company that buys intermediate goods compete with a company that can work from raw resources ? There would be no outsourcing then.

[Vladimir]

Errr... I worked in a bar, we could buy are beer tax free and had to pay taxes on what we sold, as a percentage of the price we sold it at. That's mostly how it works I believe, tax is only calculated on the end price of the finished product. Otherwise how could a company that buys intermediate goods compete with a company that can work from raw resources ? There would be no outsourcing then.

Well in less things have changed that's the way it works in the UK. Liberal democrats here want to impose a VAT and raise gas prices to European levels.

[Divinus Arma]

The cost of wages, taxes, social ebnefits, etc, all come at an impact on corporate profits. The result is higher prices. A company must raises prices in order to make a marginal profit. If they cannot turn a profit, they will simply cease to exist. Since others in the economy are all experiencing the same impact from social costs (regualtion, wages, you name it), then prices rise across the industry.

It's the price you pay for a heavily regulated socialist leaning mixed market economy.

[L'Impresario]

Well in less things have changed that's the way it works in the UK. Liberal democrats here want to impose a VAT and raise gas prices to European levels.

No it's applied to the final price, being a tax on consumption. It's not only the EU that has VAT, and it differs significantly even between EU members.

[ScionTheWorm]

in my hometown you don't get a beer below $9 in a bar goddamn moralist taxes

[Flavius Clemens]

I believe that "sales tax" of 20% mentioned earlier was referring to a Value Added Tax (at least in the UK). That's where something is taxed at EVERY level of development. From oil pumped out of the ground, to molded plastic, to finished item. It's not 20% sales tax, it's 20% + 20% +20%...

What's taxed at each stage is the value added by that company, so it's not quite the same as a cumuluative n% + n% +n%. In a simplified example, assume a company buys in £100 net of raw materials & energy and these are all liable for VAT at 17.5%, and it uses them (plus the cost of its employees) to produce goods it can sell at £200 + 17.5% VAT. The company takes £235, spends £117.50 and owes the government the VAT on its sales less the VAT on its purchases so £35 - 17.5 = £17.50 in tax. The government gets £17.50 from the company and a further £17.50 from its suppliers. If it were to raise the same amount in a retail sales tax, it would still be £35 on the net £200 sales, so the consumer wouldn't see a difference.

If I remember my old economics lessons right, the extent to which VAT is a tax on companies or consumers depends on the nature of the market for the particular product. The higher the level of competition the harder it is for the comany to pass the increased price on to the consumer.

Of course there is the separate question of how the relative complexities of VAT and sales tax influence company costs and therefore prices.

[The_Emperor]

all that free healthcare doesnt pay itself.

Only by our taxes, and even then you only have to look at the terrible state of the NHS to get a good idea of how well it is going.

At any rate the UK does have much higher prices on everything than in Europe, "Rip-off Britain" is a live and well under Tony Blair.

[doc_bean]

The cost of wages, taxes, social ebnefits, etc, all come at an impact on corporate profits. The result is higher prices. A company must raises prices in order to make a marginal profit. If they cannot turn a profit, they will simply cease to exist. Since others in the economy are all experiencing the same impact from social costs (regualtion, wages, you name it), then prices rise across the industry.

It's the price you pay for a heavily regulated socialist leaning mixed market economy.

Now you see, that would make sense if the stuff actually got made in Europe. It doesn't, it's imported, distributed, transported and retailed in Europe, rarely designed or manufactured here. And even if it is, this is a global economy, the cost of development (since I was mostly talking about games, cd's and electronic products) is the same whether it is sold in Europe or in the US.

What you're saying is basic economic theory of course, and is right to a point, but just can't be applied here. The major extra price rise should be due to taxes (about 20%) and retail wages (transport shouldn't be that much), since the rest of the costs are about the same whether something is sold in the US or in Europe. Now a DS game (just to give a comparison) would cost about $30 in the US and $50 over here (really I'm being cheap here). And just for the record, games are normally in english here, most often with english manuals, so they can't claim it's due to translation costs either. Now let's say the good people at Nintendo sell their game at $20 to the retailers (it will probably be more), that would mean the US company makes about $10 on the game (gross), now the same game in Europe gets sold and, after taxes, gives the retailer about $40, minus $20 for Nintendo, gives the retailer 2 times the amount of money the US retailer is getting. Even if retail cost (wages etc) was double what it was in the US, they'd still have more left then the Americans ! (that is twice as much)

So really, what it boils down to is someone is screwing us bigtime, and for once it isn't the EU or the government (whichever one it is) it's either the retailers or the multinationals (Nintendo in my little example). Either the retailers are selling games with $10 profits a game (hey, it must be something like that with cd's nowadays) or nintendo is charging Europe more for exactly the same product (long live globalization !). I'm just wondering which one it is, though it's probably a combination of the two.

[Divinus Arma]

Doc, if your are talking about imports, than you have to take currency exchange rates into consideration.

Look at it this way:

Say I agree to import to Europe at an exchange rate of 1$/1Euro. We sign the contract, but over the course of the year, the exchange rate changes to $.075/1Euro. I just took a 25% hit in revenues because of our agreed upon contract. Now there are ways to mitigate this through currency forward contracts, hedging, etc, but I am likely to still experience some transaction exposure. Of course, conversely if the dolalr should rise against the Euro than the European company takes a hit and I get an unanticipated increase in revenue.

Now that is just currency fluctuation. Let's talk about the general relationship between international transactions. As a European country, there are a host of trade agreement the EU or your individual nation might have with regional players, Asian, North America, etc. If Europe does not have a free trade agreement on ceertain products in certain regions, you may be experiencing the effects of tarriff on imports to your country. This is going to raise distribution costs for the country of origin and this will be passed on to teh consumer: you. Protectionist policy in Europe may contribute to unreasonable tarriffs protecting industries that the governments seek to protect until the domestic industry can become competetive globally. In essence, your government may be attemtping to place an industry in an economic incubator before relaeasing it to the wolves of international free trade.

And let's not forget that even imports to your country will still experience many of the domestic costs, depending on the level of FDI into your country. Imports, while generally cheaper and easier to the importer in the short run than a wholly owned subsidiary, incur enormous transactions costs, distribution costs, etc. On the other hand, subsidiaries suffer from intense local regulation of a semi-socialist economic model.

Sorry. Lot's of spelling errors here that make me look like an idiot. But I hope you get the picture.

Bottom line, if you want to drop the prices of imports to your country, then you need to support deregulation, lower wages, and free trade agreements with competitor nations.

[Papewaio]

Monopolys, Tariffs, Artificial supply shortages (DVD regions), higher wages, retail outlet costs (rent, government regulations, utilities) etc

Lots of factors that will make an item cost more or less dependent on ones locale.

[Csargo]

You can just Come to America it shouldn't be hard just go to Mexico and cross the border illegally it shouldn't be hard people do it all the time.

[Divinus Arma]

Shhhhh. He's listening!

Spoiler Alert, click show to read: 

And so is he!

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(Except he doen't care about the border)

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