/ Technology

International trade must be fairer to stop the Great British rip-off

Have you noticed that tech products often seem to be more expensive in the UK than, say, the US? Our chief executive Peter Vicary-Smith says Brits are still unnecessarily paying over the odds for some goods.

Sometimes, it rather feels like there’s a large sign above the UK saying ‘Ripe for rip-off’.

It’s 10 years since Which? first challenged Apple to justify why it charged UK consumers 20% more than those in France and Germany to download the same digital music track on iTunes. Eventually, Apple agreed to cut the UK price.

In the 1990s, Which? launched the ‘Great British Car Rip-off’ campaign, exposing the astonishingly high prices of new cars in the UK compared with the rest of Europe. Eventually, prices fell to be more in line.

The Great British rip-off

While UK consumers have benefited in some ways from a European Single Market, where there’s greater access to products sold elsewhere in the EU, we’re still paying over the odds for some goods, particularly many imported from outside the EU.

Our latest investigation, ‘The Great British rip-off’, shows that – taking tax out of the equation – a MacBook Pro laptop costs £194 more in the UK than it does in the US. Apple is far from alone. While companies selling their physical products, such as laptops, can point to higher operating costs in the UK (which is only a partial justification in the view of our supply chain expert), sellers of digital-only products, such as software, have no such justification. So why does certain software cost hundreds of pounds more in the UK than it does in the US?

While Which? is pressing manufacturers to play fairer, we’re also pushing the Government to boost e-commerce by dropping import charges for any goods with a value of less than £390. Not all products are subject to these fees (laptops aren’t but clothes and TVs are, for example). Longer term, we’re supporting an ambitious free trade agreement between the EU and US, which could cut all import duties on products from the US.

Are UK consumers ripped off on tech products compared to US consumers?

Yes (96%, 1,889 Votes)

Don't know (4%, 75 Votes)

No (1%, 11 Votes)

Total Voters: 1,975

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Comments
wcw1966 says:
22 July 2014

Which? you say is “…supporting an ambitious free trade agreement between the EU and US, which could cut all import duties on products from the US”. Should it be? This is the agreement that is being managed by corporate lobbying groups, in a far from transparent manner. These two aspects make it highly unlikely consumers will actually benefit. Self interested corporations, for example,will always prefer monopolies (I mean economies of scale of course, to help you obtain a less expensive product!), but are less keen on the strong independent regulation that holds them to account or ensures consideration of the public interest.

Hello wcw, While we support the Transatlantic Trade and Investment Partnership (TTIP) in principle it is with some reservations around the detail and we want the negotiations to be as open and transparent as possible.

Context for others, the EU and US are currently negotiating the TTIP and are seeking to increase free trade and reduce unnecessary regulation. We’ve written about this here: https://conversation.which.co.uk/consumer-rights/shopping-online-from-america-us-company-customs-limit-charges/

John Airs says:
29 July 2014

Some reservations! The TTIP and the Investor-State dispute settlement (ISDS) insisted on by the US in almost all its bilateral investment treaties to date simply means the end of democracy in the EU. If the state, to protect human rights, workers’ rights, animal rights, or for health and welfare, health and safety, environmental, climate, or any other public interest reason, adversely impacts on a corporation’s profits that state can be sued and taken to an international arbitration tribunal. Not a public court with official judges but a secret clique of corporate lawyers with a vested interest in ruling in favour of business. This is the ultimate neoliberal coup (the economic ideology that brought us 2008 remember) and you have some reservations….

The trouble seems to be that the law has become so complex that the politicians, never mind the average elector, cannot possibly understand what goes on. For that matter, neither does the high street solicitor, despite what he charges (+VAT) per hour.

I recall being told by an independent financial advisor (IFA) some years ago that they are expected to understand something the size of a telephone directory close printed with new regulations every year. Fortunately for him he was about to retire.

It is this ridiculous level of complexity that must to some extent be blamed for the 2008 mortgage scandals and the crash.

John Airs – A very pithily put summary of the dangers inherent in allowing trade negotiations and treaties to override national law and the wishes of the public.

Bob Robinson says:
30 July 2014

Whilst we continue to by goods that are more expensive than in other countries they will continue to charge us more, the answer is for customers to stop buying them.

Vipul Patel says:
23 August 2014

I’m amazed.

You say ‘some reservations’ to what every other consumer rights and social justice group see as disastrous for the British public.

Which? have spent how many years fighting for small victories to improve legislation, enforcement, and standards but you are happy to throw all that away for a cheap pair of jeans?

Why would an American company want to negotiate a trade agreement that increases regulations it has to comply with?

Obviously they won’t, their only purpose is to water down European protections so why is Which? unconditionally supporting (and Cameron loves using Which? support as proof of the ‘public interest’) this government and the talks when you obviously (like the rest of us) have no understanding of what is happening behind closed doors?

Look at this: http://youtu.be/Y4OQeekSD6s

As anyone who has had any marketing or sales training knows the price of anything is not dependant upon manufacturing cost, or transport cost, or the profit margin expected, or even the tax added. It is solely dependant upon what someone is prepared to pay. So if you want or expect lower prices just don’t buy until the price is acceptable. See the prices tumble if we all did that.

totally agree , often in clothing trade and footwear, suppliers have sales meetings to determine a cost, “How much can we sell this for? . Not what it costs. Markups of 800% common.

Fully agree with Chris & metoo.
“What the market will stand” pricing is normal especially when the products are highly desireable and there is little competition.
Businesses are there to make money for their shareholders or owners.
To balance this you do need good anti-cartel and monopoly rules.
Non-EU companies can still control the sale and pricing of “grey-imports” in the EU, removing these controls would provide more competition on imported goods.
Remember Tesco were prevented from importing and selling Levi jeans at low prices under Trademark legislation.

John says:
26 July 2014

[This comment has been removed for breaking our commenting guidelines]

John,
Did you understand the content of the message? I imagine you did as you have apparently read it very closely and decided to criticise the author for a mistake made by many people and would not necessarily be picked up by a spell checker.
Perhaps now you would like to correct my grammar. Feel free.

“The purpose of Customs Duty is to protect each country’s economy, residents, jobs, environment, etc., by controlling the flow of goods into the country” It also produces a source of income for the UK. If that income is lost, then it will have to be made up from some other tax. At the moment I believe you can import goods to the value of £135 without paying duty. Any number of times. That seems reasonable? So why should the limit be trebled? Just a question as to why we should lose tax when most of us are still in somewhat austere times

You’re incorrectly assuming that lots of people currently buy goods costing more than £135 and pay the duty. I would argue that this rarely happens, either because people are put off by the £135 limit and simply don’t buy the goods, or they do buy the goods and don’t declare them. Therefore the £135 limit creates more problems than the tax it raises.

NFH, I made no such assumption.

Simple problem is, if you import something with a value of £136, you’ll have to pay the duty. I know it’s an arbitrary threshold, but it can afford to be raised at least to the level that Which proposes, without damaging the economy. The Governments can do THAT all by themselves … result: we get screwed. Time for a little payback.

Hi Malcolm, thanks for your comment. Tariffs are not primarily a revenue raising device – they’re more about controlling trade. VAT is the tax in question here and we’re not suggesting any changes to that. We’re just asking for the threshold for goods bought online to be brought into line with that placed on goods brought back from abroad. Firstly, this will mean shoppers can take advantage of cheaper goods on sale in the US when they buy online. And it will also stimulate trade in both directions with a net effect of higher profits for UK based small businesses that would pay more tax as a consequence.

Patrick, I understand your point, but nevertheless duty is revenue for the Exchequer, just as is national insurance – a tax by another name. .It also does control trade on some goods and presumably for a purpose.
The difference between the allowance when you bring goods in from abroad – £390 – and when you simply import online – £135 – is that most do not normally have many opportunities to travel and return with goods whereas you can, as an individual, presumably import as many times as you like. The latter would undermine, perhaps, commercial businesses who have to pay duty on all they import. Setting an annual limit would be one way to control it, but clearly almost impossible to administer.

Consider that the government fine people, for example who drive up a motorway at 100 mi/hr, in order to discourage people from antisocial behaviour. Why do they not think that having a tax on sales does not discourage people from buying things, or a tax on capital gains discourages people from trading stocks?

They did pass a law prohibiting VAT registered traders from quoting prices as so much +VAT, but few follow it. The worst offenders are solicitors who always hand down bills in small chunks like that to get people to swallow them.

There are goods and services taxes in other countries which are similar, and if these were removed on exports then the price to the consumer in the UK would be lower. However this doesn’t seem to happen, ie the UK consumer pays foreign sales tax plus UK sales tax.

Incidentally VAT is a silly name for it. It is charged on services that add no value to anything, such as solicitors’ services. They may be necessary “compliance costs” but they are not about creating value, such as making things or works of civil engineering.

It is interesting to note that according to recent reports, the UK economy is at a higher level now than before the crash started by the collapse of the housing loans market in the USA. I suspect that the massive cutbacks in government expenditure have been part of the cause for this.

Chris – you are absolutely correct and it is rather disingenuous not to admit this is the case. Which? has always been a great fan of Apple products but perhaps in its enthusiasm has not made much of a case that they are over-priced. Or perhaps they are not over-priced at all and UK Apple buyers are just pretty price insensitive.

Lets suggest a boycott on Apple purchases [and reviews] until the prices become more normal. We can then try the same trick on expensive perfumes ……..

Although there are some obvious discrepancies in pricing between the US and the UK, it’s not as bad as seems on face value.

In the US, they have the advantage of scale of economy – a potential market 5 to 6 times the size of the UK, most with far higher disposable income to splash out. They also have sales tax which is NEVER shown on line, mainly because it varies from State to State and depends where the purchaser is located, not the seller.

By the time you add transport cost, import duty and 20% vat, prices are not too dissimilar. Dealers in the UK have higher overheads – corporation tax, higher staff costs, higher business rents and rates – so often much of the differential is justified.

People have mentioned Apple products: I agree that they are overpriced, but then so is a Bentley, Royce and other premium products. If you want a premium product, you pay premium prices: that’s marketing. Just don’t buy Apple. I certainly never will.

If you really want to investigate outrageous pricing, why does my vet charge £38 for a 30ml bottle of oral Metacam for our cat when I can buy it on line for £14.99? Let’s investigate vet prices.

So, “Dealers in the UK have higher overheads – corporation tax, higher staff costs, higher business rents and rates – so often much of the differential is justified”. What, then, should we say about large companies using what almost amounts to slave labour in 3rd world countries, yet still charging high markups in the UK. All the so-called reasons for higher UK pricing are just so much woffle, especially from companies like Apple.

I was able to download a high-end video editing suite from Sony with no appreciable price differential US to UK. So, was that simply an aberration, or should import tax simply be dispensed with altogether. I suspect the latter would be more equitable for all.

For that to work, all countries would have to agree to abolish import duties. The EU can’t agree level duties or taxation amonst its members; getting the World to remove import duties won’t happen in our lifetime.

Expat says:
22 July 2014

I would like to see Which do an investigation also on the variety of goods sold in the UK versus the US (with the latter getting a much larger selection of everything, across all price and quality scales). Of course, the US is a bigger market, but once goods are produced at factories in China, why can’t they offer more or less the same choice to both markets? For example, Dyson is now advertising it’s latest and greatest DC59 Motorhead cordless vacuum, but they do not offer it in the UK!! (Dyson UK told me it was the same as the DC59 Animal, but that is also offered in the US and a quick look at the photos shows they are different machines, with the Motorhead being – according to the US website – significantly stronger).

expat – It is a lot cheaper to ship to the West Coat of North America than to the UK. And for electrical goods we almost uniquely have a special plug. So I am not convinced that a very robust case could be made even before we look at the cost of land/storage, wages, national insurances etc.

When you say range of goods given the US runs from Alaska to Puerto Rico the proper comparator surely must be Europe where the range of climates and terrain would mean an equally larger range of goods. And I suspect of quality also.

Not many people now this but all the innovations in kitchens go from Europe to the US. Cars are another area where the US have been quite backward. Technologically I would buy European in preference to US stuff. It may be cheaper and though that may be the Which? mantra I prefer quality and length of service. After all it costs a lot to add to landfill in the UK.

Expat says:
22 July 2014

Good point about the cars – I agree! And good point about the kitchens; I think Americans would like european kitchen appliances too if they would try them – I adore my mini-dishwasher, built-in fridge and induction hob – but in the US people are too used to huge and inexpensive stuff that finishes the job super fast but inefficiently using cheap energy (nobody can believe my laundry takes over 90 minutes here, and just for the wash. On the other hand, I LOVE LOVE LOVE my enormous tumble dryer that I brought with me when I moved here, so I still have some affection for the US approach as well). I don’t fault the UK for lack of huge tumble dryers, however – clearly they wouldn’t fit in most people’s homes. However that Dyson – a British company for heaven’s sake – won’t sell its top-of-the-line vacuum cleaner here is just frustrating! I would love it, and cannot really bring myself to buy second-best now that I know of its existence.

Not so sure about the Europe-vs-US argument in terms of variety – I’ve lived in Germany (and search German websites) and had the same problem, and my friends from Denmark complain as well. But, it is hard to know, so may be true.

However the landfill argument doesn’t hold up so well – I actually looked into this a few years ago as it was thrown at me so often as a justification for high prices. The gate price for landfill varies greatly both across the US and the UK, but the average price for a ton of trash at the gate in the US (was) about $50. In the UK they TAX a ton at the gate about £50 (could be more now), before costs, so my conclusion was that while it is indeed more expensive here in the UK, quite a lot of that expense is self-inflicted. If the £50 covered environmental externalities it would make economic sense, but a number of studies (you’ll have to trust me on this – but you can do the lit search yourself as well) suggest that true environmental externalities are way, way less costly, especially since landfill efficiency has hugely improved over the past 15 years – so much so that smaller landfills went out of business (in the US) as they couldn’t compete. So, actual landfill cost is plummeting, but in the UK the price remains high because of taxes.

In the end, high prices and (average) low variety in the UK remain a bit of a mystery to me, so I welcome investigations and/or proposed explanations, and I’m happy to find that there are other people interested in this phenomenon as well.

Mark says:
22 July 2014

I believe that this story is completely out of context, virtually all the goods mentioned are tied to the dollar, which has been gaining strength against the pound of the last hundred years while manufacturing has declined in the UK at virtually the same rate so the UK rely’s on importing for these type of goods, it no different to Cheltenham race course charging double the price for a pint of Guinness to what in it is at your local or paying £1.50 for a bottle of wine in France that is £20 in Tesco’s, the bottom line is, if we want cheaper good here, we need to be manufacturing more in the UK!

Mark says:
22 July 2014

It’s rather difficult to work out whether importing will save you money, as HMRC doesn’t list the custom duty for different types of goods on its website. All they say is “the average percentage is between 5% and 9%, but it can be as low as 0% or as high as 85%.”

Mark, If you put “import duty” into Google the HMRC have a link that gives clear information; dutycalculator.com will calculate duty and vat for a whole range of specific goods from many countries.

I find it infuriating that you have to pay a disproportionally high admin fee to the courier to collect the duty + vat. Why can’t HMRC have an on line payment site where you can enter the reference detail and pay by debit card for free?

I think it is deliberate to discourage individuals importing goods.

The admin fee may seem large, but when you consider the problems of linking a HMRC payment to a particular parcel before delivery I cannot see how an online payment system to HMRC would work and the present system is labour intensive.

Every international parcel is already given a unique tracking number. If the HMRC deem that duty/vat is due, the courier should email the recipient with the tax invoice notice. The recipient logs into the courier site, enters the tracking reference and clicks on the linked HMRC invoice, pays the invoice. That action marks the tracked package for the courier to DELIVER. The courier delivers the package, emailing the recipient of its progress.

Is that not simple, simpler than the current convoluted abonimation?

The problem is complete disrespect for other people’s time and money.

This starts with the professions and ends up with trades. Set up an unavoidable system and charge people “compliance charges”.

Consider for example all the extras on buying a house today compared to 50 years ago. Unless you are paying without a loan, you have to have a whole swarm of expensive reports, some as stupid as counting light bulbs, or a flood report for a house at the top of a hill. Consider the medical professions. Why give one appointment when two will do? Two visits to the centre, two “take a seat” 20 min waits, two traffic movements, two car park sessions etc etc. (One to the nurse, another to the dr.)

Of course what Terfar proposes is simpler and costs very little to run, and also reduces tax evasion.

However an entire industry of office workers are out of work. The irony is that they also charge VAT on compliance charges even though compliance adds no value to anything.

There will always be economic crises until economic systems produce wealth rather than churn it around so that the churners can take off chunks for nothing.

Jim Kent says:
31 July 2014

Linking HMRC charges to an individual package is no problem for our ‘Victorian’ postal service. It’s just a terrible time-wasting percess.
If you’re not home, a worker at the office has to write out a card detailing the customs charge(s) and specifying their ‘office hours’, which the postman delivers. You then have to arrange to travel several miles to a sorting office to pay the fee (and an attrocious £8 “handling charge”), collect the item and travel back home again. That is, if your sorting office doesn’t close at 1515 and you have a suitable means of transport that gets you to the sorting office and back without wasting most of a day faffing around, and probably requiring time off work.
Terfar’s solution using electronic data transfer has great merit, and really ought to be a manifesto item for any sensible (?) Party.

the uk is run by a vast organisation known as spivs r us, they control the banks, utilities, insurance companies, you name it, they run it. It has been known for years that you can buy a British made car in the USA at a lower price than you can in the UK, and it is not just down to taxes. It is not just in the USA where prices are lower for high tech goods, Germany also has lower prices.

Nigel says:
22 July 2014

Having worked in a tech company which operated on both sides of the Atlantic, I’m not convinced that US consumers are always better off.

As previous posters have said, the price in any market is largely determined by the price people are prepared to pay. Some brands, such as premium electrical brands and cosmetics companies, work hard to control who sells their products and how they do it, to prevent the product being discounted.

And it’s certainly true that there is a scale advantage for distributing stuff in the US where the market is 4x the size of the UK – all the costs of operation are spread across 4x more business, and many of the costs are already lower.

On the other hand, the US has MAP (minimum advertised pricing) where manufacturers quite legally can force retailers not to advertise their products below a list price. Some brands police this very aggressivly and this preventing consumers buying the product at even lower prices. This would be completely illegal in the EU.

Expat says:
22 July 2014

Are you sure about that MAP point? Up until a few years ago, what economists call RPM – retail price maintenance, was actually unconstitutional in the US. The Supreme Court ruled against that, but it is now only legal in very narrowly defined, particular situations and rarely used. On the other hand, in Europe – and I presume in the UK – it is used routinely to prohibit retailers from selling at below some manufacturer’s given price. Remember the TESCO versus Levi’s case a few years ago here? Manufacturer’s can take retailers to court – and win- here to enforce these price floors, which are basically illegal in the US. Personally I suspect price floors can also enable indirect passive collusion on prices….

I thought we could put this to the vote – I’ve added a poll.

I wonder what product guarantee you’ll get if you import directly from USA?

My experience has been mixed. Often, a supplier will identify goods as being a “gift” with a somewhat lower value that was listed. This does not affect any value claimed for loss, but does avoid attracting undue import duties. |I have no qualms about this as import duties are just wrong in a global economy and we get shafted much too often by Government departments.

I fully support the Which demand for a much higher threshold as a first step to getting rid of such taxes altogether.

For many years now, we have been grossly overcharged for cars in the UK, which can be bought cheaper elsewhere in Europe and would remain cheaper even with the addition of the usual taxes.

The addition of import duty on any imported good is the poison icing on the top of the cake.

While I would prefer not to pay duty or VAT the government does need our taxes to operate – but a rather higher threshold is a very reasonable suggestion. However, what Which? should really be working for is the abolition of “customs handling charges” by the Post Office and other carriers for collecting these taxes. These costs should be taken from the taxes collected because if this happens there is every incentive to do the job as cheaply and efficiently as possible, whereas if the recipient is charged there is no incentive whatsoever to keep costs down, or even not to charge a fat profit, since the recipient has no control over such charges. I have just imported a specialist 3-D scanner unavailable in the UK – the “customs handling charge” was nearly twice the total of duty and VAT.

J R Rozmanowski says:
26 July 2014

Well done Which for bringing this old SCAM to the public’s attention.

I was fortunate to work in the fledgling PC industry and it was a case then and continues to the present that all manufacturers of peripheral equipment (printers, screens, drives & most accessories) use a 1:1 exchange rate for £:$. It is a absolute disgrace!

I hope to buy an Epson photo Scanner in Spain as I refuse to pay over £200 for the same item I saw in the USA costing $200.

It appears to be fashionable in the UK in most sectors, to inflate the price to almost ridiculous levels and offer reductions through endless sales and various inducements and then be pestered with continual product and market appraisals.

For the Euro skeptics – this situation could never happen in mainland Europe as real competition exists and in many countries Builders, Plumbers, Restauranters etc have to be registered with their government agencies, prove their respective trade competency, pass a test in VAT accountability and also as an employer.

“For the Euro skeptics…..” It is a pity that such diligence does not extend to those who run Europe. Have their accounts yet been signed off?

Richard Clarke says:
26 July 2014

I think one of the reasons we pay more is because companies target us to pay more because we can boast that our stuff was expensive. We are too soft and too lazy as a nation rather than buy elsewhere or haggle we buy the nearest, quickest and easiest. We spend on easy to get credit and have a worry about it later attitude. To any big company we are easy to sell to we have to have to at whatever cost until we come together as a group and fight back which the majority of us are to lazy to do we will always be paying more.

Let’s start with our Post Office. I received a duplicate order from the United States a fortnight ago, postage I noticed was $3.30. I returned the package (a jiffy bag) unopened postage £3.80. RIP OFF BRITAIN. Incidentally do you realize that our Post Office rely on the 1928 Post and Telegraph Act to limit their exposure ( time limit for proceedings to be brought) to one year rather than the normal three years!

And if you had had a Royal Mail Parcel contract you would have paid a lot less than £3.80 as would probably happen anywhere in the world.

Only available to registered businesses.

The RM is almost three times the cost of Hermes for sending a 2.5kg package. Either there’s a revolution in the RM or they’re going to fail. (Or bought out by a modernised competitor.)

“Only available to registered businesses.” of course but relevant when compairng the price for a business to ship and the return price.
Of course RM and Parcel Force are lumbered with having to deliver everywhere at the same price, but I agree that they are expensive for packages over 2kg.

Why do we still have a price difference of almost £4000 between the UK and Germany on the price of a Munich taxi (BMW)? Mercedes likewise.

lets face it. the chances of our government doing us a favour by dropping import tax on some goods would probably be something left for a pre-election promise just a few months before we vote, and even then, if they did go through with it they’d just slap on an extra few pence/pounds here and there to other taxes and fees to make up the difference.

Norman F says:
26 July 2014

Beyond tech – have you looked at car prices UK/US? Even allowing for VAT there is a significant gap.