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Justaphysicsnerd

Why is computer hardware so heavily taxed in some countries ?

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Posted · Original PosterOP

In some countries like the USA and Canada, you can a get decent PC for like 800-1000 USD. But in other countries government taxes computer hardware so heavily that you may need to spend a nice 1000-1200 USD to get the same rig. Why do they do it ? You might say that they do so because there is not a lot of demand in those countries. But the demand isn't there because it is so freaking expensive, if the hardware were to be cheaper, then there would be more demand.

 

Like the country I live in an RTX 2070 which costs 500 USD, costs 650-700 USD. Some retailers in order to make profit, go as far as to sell these at a mind boggling 700-800 USD to make themselves some profit.

I was planning to build a basic rig with a Ryzen 3 3100 and a 1660 Super, it costs me around 1300 USD. I chose a B450, not even an X-series or a B550.

 

I always get so freaking angry, when the government taxes computer hardware so high to get dat REVENUE and not tax something else or improve there system to get less corrupt !

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Could be a couple of different things.

 

1. VAT/Sales tax: as far as I have seen, people in the US have to file sales tax on their own, which is just not the case in all other countries. Sales tax in the US, but also anywhere else in the world can be between 5-30%, which means the prices you see in some countries are with and others without this added cost.

 

2. Economy of scale: In some countries, PC's components just are not as abundant as in the US. Shipping 1000 of something is cheaper per unit than shipping 10 of something. In countries where PC components are less popular (and/or smaller countries) may not benefit from the same economy of scale as other countries.

 

3. The route parts take: this goes hand-in-hand with the above point, as suppliers or manufacturers of components may decide not to supply directly to a certain country; relying on suppliers in a nearby larger country to distribute among the region. A good example would the Western Europe; where Germany receive a large quantity of components and suppliers in that country serve other countries in the region. Of course with Schengen, there is free travel of goods, but transport costs still apply.

 

4. Import tax: another point which ties in with the previous two. Some countries may decide to apply a (large) import tax on foreign goods to encourage local development and manufacturing. The best example I remember would be Brazil. In the past I had seen a show which went over the large import taxes in this South American country, to encourage local manufacturing. This meant 'commodity' tech and cars still were very expensive. Unfortunately I can't find the exact details on this and the import tax may be sort of lax nowadays (as it doesn't seem that different from neighboring country Argentina, but it's definitely something that affects the market in certain region.


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There's a common confusion point, in that US pricing doesn't include sales tax, whereas most of the rest of the world does. I'm not familiar with the details but I understand there used to be loopholes where it could be avoided, but I don't know if that is still the case. If you compare worldwide pricing with local sales tax taken out, it is often a lot closer. Also note exchange rates tend to move faster than price adjustments, as manufacturers try to take a smoother plan there.


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Tell me about it... I'm from Argentina. We have an import duty of 50% (that's right) and that 50% is after shipping: for example it out something that costs $200 in usa, and the shipping is $ 60, then you have to pay $ 130 in taxes. So it will finally cost $ 390... twice the price in origin.

The other problem is that wages are very low right now.. minimum wage is about 130 us dollars a month right now, and going down. A normal wage is about 300/350 (that's considered middle class). So we have to save a lot for a decent computer.

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Posted · Original PosterOP

@Flaquez The government in my country says that they want companies to manufacture their products locally, just as a propaganda for their party. So far they haven't ya know, provided compelling enough reasons for many companies to do so. And as far as I know, only electrical appliances (very few, and low quality ones), and some phones are manufactured in my country. Let me give you an example of that too, an Iphone despite being locally manufactured, still costs like 1200-1300 USD, yep that is right 4/3 the actual price of just 1000 USD.

And yeah as @minibois mentioned about import tax, we have an import tax of 40-50 % on computers as well. But many large online retailers of computer hardware in my country, ya know like microcenter in US and Canada but smaller, we have 2 or 3 retailers, which get hardware pretty close to their US price. So why can't all the vendors do it ? On amazon a R5 3600 was selling for the price of a 3600XT. 

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1 hour ago, porina said:

There's a common confusion point, in that US pricing doesn't include sales tax, whereas most of the rest of the world does. I'm not familiar with the details but I understand there used to be loopholes where it could be avoided, but I don't know if that is still the case. If you compare worldwide pricing with local sales tax taken out, it is often a lot closer. Also note exchange rates tend to move faster than price adjustments, as manufacturers try to take a smoother plan there.

I always understood that all prices in US are always stated without any tax and they put that on at the cash register. Could be I understood wrong or something... Over here in Europe, VAT is already calculated in prices and what you see is exactly what you pay.

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30 minutes ago, Justaphysicsnerd said:

@Flaquez The government in my country. 

What country do you live in?


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21 minutes ago, RejZoR said:

I always understood that all prices in US are always stated without any tax and they put that on at the cash register. Could be I understood wrong or something... Over here in Europe, VAT is already calculated in prices and what you see is exactly what you pay.

That's what I said? Looking over it again, I guess there is possible interpretation I was saying they don't need to pay tax, which was not my intent. The list price is without sales tax, but that is added on as appropriate at the time of sale.


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18 minutes ago, porina said:

That's what I said? Looking over it again, I guess there is possible interpretation I was saying they don't need to pay tax, which was not my intent. The list price is without sales tax, but that is added on as appropriate at the time of sale.

In the US if I something like a computer system, parts, and a few other things out of my State, I supposed to my State's(or city) sales tax on most items. Of course the States are unable to enforce payment of such taxes since they wouldn't even know about what their residents are purchasing out of state to begin with. So nobody does it. Then again a lot people are not even aware of such requirements in the first place. 

 

Other then stuff like cars, boats, and other big ticket items.

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Posted · Original PosterOP
54 minutes ago, Fatih19 said:

What country do you live in?

I would like not to disclose this, as a lot many stereotypes are associated with my country.............................................................................................................................................................
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which as with any stereotype is not true

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51 minutes ago, porina said:

That's what I said? Looking over it again, I guess there is possible interpretation I was saying they don't need to pay tax, which was not my intent. The list price is without sales tax, but that is added on as appropriate at the time of sale.

Which is odd way of doing things if you want to collect taxes. Also you never know what you'll end up paying in the end. Especially in retails where it's mostly B2C and not B2B where we just deduct the tax and company then needs to report it in their business reports as it gets tied to the companies tax number at the time of the sale. Companies that only deal with B2B sales of course only have prices without any tax.

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3 hours ago, Justaphysicsnerd said:

I would like not to disclose this, as a lot many stereotypes are associated with my country

Well since that's got everything to do with why the particular country does it nobody can say much then...

 

But yeah usually it's at least meant to encourage/force companies to manufacture locally. 


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To add onto the list of taxes, you might also run into environmental fees which is a thing in Canada that varies depending on the Province or Territory. I'm not sure if this fee applies to computer components since it's been a while since I've purchased a single component. But for everything else from a complete system, to TVs, and even portable music players, there is an Environmental Handling Fee (EHF) slapped on during purchase. Now this fee is reported to cover the cost of recycling these devices at the end of life stage. Whether or means the device is actually recycled properly and not just shipped off in a container to Malaysia to be processed is another question. 

 

https://www.recyclemyelectronics.ca/bc/residential/environmental-handling-fee-ehf/


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3 hours ago, Kilrah said:

Well since that's got everything to do with why the particular country does it nobody can say much then...

 

But yeah usually it's at least meant to encourage/force companies to manufacture locally. 

Yes, because a competitive startup semiconductor fab in Brazil is totally feasible. 
 

I don’t think politicians that put these taxes in place are that stupid. 


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14 hours ago, Justaphysicsnerd said:

@Flaquez The government in my country says that they want companies to manufacture their products locally, just as a propaganda for their party. So far they haven't ya know, provided compelling enough reasons for many companies to do so.

It's the same argument in Argentina, except it's applied to goods for which a local supply can't exist for the foreseeable future. Like goods with a single global supply chain, e.g., computer parts. You could have local PSUs, I guess, but it's not like CPU design and silicon fabs are going to pop up because you levy some tax...

In the end, what happens in some markets is that almost-finished products are imported into one of the "industrial promotion" areas, they get the very last assembly (sometimes as little as putting them inside different boxes) and sold as "made locally". And it doesn't necessarily bring the price down that much because a) the whole maneuver has a cost, and b) the only competition would be direct imports paying the full import duty, so they don't need to be that aggressive with the price anyway.

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5 hours ago, Zodiark1593 said:

Yes, because a competitive startup semiconductor fab in Brazil is totally feasible. 
 

I don’t think politicians that put these taxes in place are that stupid. 

They may not be, but the excuse they put forward to defend the tax definitely is.

 

That it's not to say there aren't other, less stupid reasons for the tax, but they don't sound as good as "we're fostering the local manufacture sector". An example of a more economically sound reason to do this as a "second best" has to do with the perennial need for foreign currency in many developing economies. The lack of an advanced local industrial sector means that many capital goods and intermediate inputs need to be imported. Since they mostly export primary goods, they typically find themselves against a foreign currency constraint. Moreover, luxury consumption goods (luxury as opposed to necessities, not luxury as in Porsches and Swiss watches) tend to be imported as well, meaning that economic booms lead to surges in imports of consumption goods, which put pressure on the currency, makes capital goods imports more difficult, and thus plant the seeds of a future bottleneck in the supply chain, leading to inflation, etc. Hence, many times the actual purpose of these import duties is to act as an additional consumption tax on the rich (by the country's standards), like a VAT surcharge when you buy imported, non-essential goods, to deter you from doing so, while also collecting money to cross-subsidize imports of capital goods and essential imported inputs if you decide to proceed with the purchase anyway. In the end, gaming PCs are not essential to the country's development (although PCs serve so many purposes that in my opinion it is dangerous to restrict access to technology to the local population). 

However, this type of argument is more difficult to explain to the population, as the better-off in the country don't want to hear their attempts to mimic the consumption patterns of the first-world middle class constitutes "luxury consumption", even though in terms of the local purchasing power it totally is. So, "industrial promotion" it is... 

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15 minutes ago, SpaceGhostC2C said:

They may not be, but the excuse they put forward to defend the tax definitely is.

 

That it's not to say there aren't other, less stupid reasons for the tax, but they don't sound as good as "we're fostering the local manufacture sector". An example of a more economically sound reason to do this as a "second best" has to do with the perennial need for foreign currency in many developing economies. The lack of an advanced local industrial sector means that many capital goods and intermediate inputs need to be imported. Since they mostly export primary goods, they typically find themselves against a foreign currency constraint. Moreover, luxury consumption goods (luxury as opposed to necessities, not luxury as in Porsches and Swiss watches) tend to be imported as well, meaning that economic booms lead to surges in imports of consumption goods, which put pressure on the currency, makes capital goods imports more difficult, and thus plant the seeds of a future bottleneck in the supply chain, leading to inflation, etc. Hence, many times the actual purpose of these import duties is to act as an additional consumption tax on the rich (by the country's standards), like a VAT surcharge when you buy imported, non-essential goods, to deter you from doing so, while also collecting money to cross-subsidize imports of capital goods and essential imported inputs if you decide to proceed with the purchase anyway. In the end, gaming PCs are not essential to the country's development (although PCs serve so many purposes that in my opinion it is dangerous to restrict access to technology to the local population). 

However, this type of argument is more difficult to explain to the population, as the better-off in the country don't want to hear their attempts to mimic the consumption patterns of the first-world middle class constitutes "luxury consumption", even though in terms of the local purchasing power it totally is. So, "industrial promotion" it is... 

Well I myself support  Luxury Taxes in general as in applying to items that only those with money then sense would buy in first place. Such things that are only brought as "Status Symbols" for example should have such taxes.

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Posted · Original PosterOP
16 hours ago, Zodiark1593 said:

Yes, because a competitive startup semiconductor fab in Brazil is totally feasible. 

I don't know if u are joking or being serious. BTW I live in India, okay now how does that help explain why the government has put a high tax on computer hardware ? And If you don't believe that there is need for hardware in my country there is a whole subreddit for it ! We have like only 3-4 local suppliers other than e-commerce sites like amazon.

And I don't believe that having at least a desktop pwoered by an i3 or pentium g4 or whatever those cheap intel processors are called is luxury, it is a necessity. Even If i plan to build a PC with an APU, it will still cost me around 100K INR

Like, just a few years ago mobile phones were thought of as a luxury by almost everyone, even my own family members. But now in my family every one has their own smartphone, be it a little 7 year old or an Old aged 66 year old.

I think many people in my country are tech-illiterate if that is an actual term, ya know what I am mean; like many people I know say "My Phone has 64 GB of RAM". If the government in the country could do a better job of ya know teaching the people about actually useful things, instead of just shoving money into their mouths, there could be much improvement.
 

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48 minutes ago, Justaphysicsnerd said:

I don't know if u are joking or being serious. BTW I live in India, okay now how does that help explain why the government has put a high tax on computer hardware ? And If you don't believe that there is need for hardware in my country there is a whole subreddit for it ! We have like only 3-4 local suppliers other than e-commerce sites like amazon.

And I don't believe that having at least a desktop pwoered by an i3 or pentium g4 or whatever those cheap intel processors are called is luxury, it is a necessity. Even If i plan to build a PC with an APU, it will still cost me around 100K INR

Like, just a few years ago mobile phones were thought of as a luxury by almost everyone, even my own family members. But now in my family every one has their own smartphone, be it a little 7 year old or an Old aged 66 year old.

I think many people in my country are tech-illiterate if that is an actual term, ya know what I am mean; like many people I know say "My Phone has 64 GB of RAM". If the government in the country could do a better job of ya know teaching the people about actually useful things, instead of just shoving money into their mouths, there could be much improvement.
 

Some sarcasm was in there. I agree wholeheartedly that computers are a necessity in this day and age. It’s more of a calling BS on the reason given for Brazil to charge such a steep tax rate on computer hardware. 


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9 hours ago, Justaphysicsnerd said:

I don't know if u are joking or being serious. BTW I live in India, okay now how does that help explain why the government has put a high tax on computer hardware ? And If you don't believe that there is need for hardware in my country there is a whole subreddit for it ! We have like only 3-4 local suppliers other than e-commerce sites like amazon.

And I don't believe that having at least a desktop pwoered by an i3 or pentium g4 or whatever those cheap intel processors are called is luxury, it is a necessity. Even If i plan to build a PC with an APU, it will still cost me around 100K INR

Like, just a few years ago mobile phones were thought of as a luxury by almost everyone, even my own family members. But now in my family every one has their own smartphone, be it a little 7 year old or an Old aged 66 year old.

I think many people in my country are tech-illiterate if that is an actual term, ya know what I am mean; like many people I know say "My Phone has 64 GB of RAM". If the government in the country could do a better job of ya know teaching the people about actually useful things, instead of just shoving money into their mouths, there could be much improvement.
 

India doesn't have full diplomatic relations with Taiwan, having full diplomatic relations would open the door to companies like TSMC to set up a fab (a necessary but perhaps not sufficient step).

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add 5-15% sales tax to US prices.

On 9/20/2020 at 6:06 AM, minibois said:

1. VAT/Sales tax: as far as I have seen, people in the US have to file sales tax on their own, which is just not the case in all other countries. Sales tax in the US, but also anywhere else in the world can be between 5-30%, which means the prices you see in some countries are with and others without this added cost.

no filing for sales tax, it is done at the time of purchase. there are those that don't have to pay, for example resellers and distributors don't with the right paperwork.


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11 hours ago, GDRRiley said:

add 5-15% sales tax to US prices.

no filing for sales tax, it is done at the time of purchase. there are those that don't have to pay, for example resellers and distributors don't with the right paperwork.

There are situations where you're supposed to file the sales tax yourself.


Example: If you buy from an online retailer that has offices/manufacturers in a different state, they may not charge you taxes up front - with the implication that you will claim those purchases when you file your income taxes.

 

That's a logistical problem though. The IRS and the state tax revenue services need to make it easier for large retailers to collect tax for every state (that has sales taxes). One possible solution to that problem is to have the IRS centrally collect all sales tax, then distribute the appropriate revenue to each state revenue service.

 

Canada does this (with some provinces) with HST (Harmonized Sales Tax) - it's collected by the CRA (Canada's IRS) and then the CRA forwards the provincial portion to the appropriate province. Not every state has an HST though - several still use a separate - provincially collected - sales tax. And of course, Alberta has no sales tax. Which made sense when they were swimming in oil revenue, but these days, they should really consider adding one in.


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On 9/20/2020 at 8:54 AM, Justaphysicsnerd said:

Why do they do it ?

Well it depends. If the components are not produced in that said country and have to be imported there could be tariffs involved. In the case of the US, goods can easily and cheaply be brought over the Mexican and Canadian boarder crossings. This is due to NAFTA, though they did recently do some work to it, not sure if the kept the name NAFTA. When I worked at Sams Club all the Samsung TV's were "Assembled" in Mexico. This was due to the free trade agreement. 

 

The second reason is consumption tax. Governments charge tax on Goods and Services. In the case of the US, we DONT have a federal consumption tax. Each state will have different laws, but some states have what's called a Sales Tax, its pretty much the same thing as VAT in other countries. In our case the state will charge a tax on a good. Here in Michigan its 6% on pretty much everything but unprepared food, as in about anything you can get at a grocery store thats a food item. Food thats sold at restaurants is taxed. 

 

Another reason it could be high is due to transportation and storage costs. Trucks, Fuel and insurance all go in to the price, then it costs money to store an item for extended periods. 

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Because politicians needs your hard-earned money to pay for their yacht.


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