Originally
posted by
H4xOr WaNgEr:
Not necessarily foog.
Doing what you suggest would create incentive for business to price their products to intentionally cause a round down after sales tax is tacked on. As a result there would be a net effective price decrease for products while the business retains the same profit off the sale. Government takes the entire financial hit and the business benefits from a decreased price.
If instead the price were to always round up, then firms would have incentive to price their products to always come out to a multiple of 5 after taxes are applied. Doing so would avoid an increase in the net effective tax rate on their products. This of course would also cause competitiveness issues.
It is also questionable whether this penny change will effect digital money/transactions.
No H4, you haven't thought this all the way through. It may create an incentive for businesses to do that... but incentives don't matter when it's not mathematically possible to fix prices. At least, not in the part of Canada where I am.
Price fixing to always round up (or down) falls apart as soon as people start buying multiple items. If you buy 1 or 2 items at $1.01 it rounds down. Buy 3 or 4, it rounds up. Every price will round down as often as up.
(Okay, maybe 1 item purchases are more common than any other single number, skewing this slightly, but the psychological effect of .99 pricing is almost certainly going to be a larger variable in total sales than lowering the consumers cost by 1 or 2 pennies on purchases of 1 item anyway).
As for fixing prices to always come out as $0.05... how easy is that to do with a sales tax of 13%? How many prices actually come out to an even nickel after tax?
Again, this is easy if you assume people are only buying 1 item... but if you assume people are likely to buy anywhere from 1 to 10 items... your options become seriously limited. Essentially, you have to price your items at $1.77 or multiples of that. This means that every item priced between $0.01 and $1.77 would have to be moved to $1.77... a huge price increase in a lot of businesses where many items are under that price.
And even this falls apart eventually. At $8.85, a penny creeps in after tax for 10 items again. This keeps getting worse until, at $44.25 you're back to only being able to purchase one item without having to deal in pennies.
I'm sure we will see a number of items near the $1.77 price point move to it. It's actually already a common price for things like chocolate bars, because businesses have realized that it saves them dealing in pennies. But to suggest that all items will be arranged so that, after tax, they come out to even nickels is simply wrong.
-Fooglmog
Guy with no clue.