As I write this Grassroots Corner, we are traveling in Norway. Norway has a Value Added Tax (Merverdiavgift or MVA), and I make a point of looking at my receipts when I am in a country like Norway that has one.
On the train from Oslo to Bergen I bought two cups of hot chocolate. You will note from the receipt, below, that the drinks cost 94 Norwegian krone, a little over US $10.00. The net price is Nkr 81.74, and the tax is Nkr 12.26. The tax rate is 15%, fully disclosed. We note that the FAIRtax also requires the retail seller to produce a receipt showing the full price, the tax, and the net price of the good.
The 15% rate on the hot chocolate receipt is apparently the rate for food. Normally, the tax rate in Norway is 25%, including food at restaurants. The tax rates on food, normal items, special items, and exempt items are uniform throughout Norway. There are no local sales taxes imposed by the fifteen counties (fylkeskommuner) or the 357 municipalities (kommuner).
The rates in Norway are tax-exclusive, i.e., calculated on the net price of the good or service. The FAIRtax is calculated differently, like the income taxes, payroll taxes, and death taxes that the FAIRtax replaces. The FAIRtax is calculated tax-inclusively, i.e., on the total price of the good or service, including the tax.
You will note on the hot chocolate receipt that the net price is designed to make the price the consumer pays, including tax, come out to an even number. Unlike in the United States, where state sales taxes are added at the cash register, the price quoted in Norway on a sign, menu, poster, or store shelf is the price the consumer pays.
Europeans who tour the U.S. often complain when they pay a higher price at the cash register than the price quoted at the store shelf. They think at first that the store is pulling a fast one on them.
Maybe the current U.S. practice regarding state sales taxes isn't so bad after all. Although the VAT in Norway is fully disclosed when customers request a receipt, few pay attention to it. When the tax is quoted at the cash register in the United States, the customer starts to get an inkling about how much the state government costs. Do we want the FAIRtax to be paid in addition at the cash register?
We enjoyed the hot chocolate:
And the train ride:
And the scenery in May:
Our next VAT report will come to you from the UK and Ireland.
If you visit a country with a VAT, I would love to hear from you.
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TAKE BACK CONTROL!