The UK has raised its VAT from 17.5% to 20% (pdf file), effective today. That means any U.S. product or service (that is not exempted) has to pay 20% at the border when sold to the Brits. But of course, the Brits can export tax free because they don’t pay the VAT on exports.
So… our U.S. exports are double taxed when going to Britain (and over 140 other countries) and British exports to us are tax free.
When selling to Britain, then, you have to cut your prices to make up for not only transportation but also their 20% VAT.
*** Update ***
Apple is one company being hit by the UK VAT hike.
VAT rose from 17.5 percent to 20 percent on Tuesday in the UK and prices in the Apple Store have risen accordingly.
Now you’ll have to pay at least £439 to get your hands on an iPad from Apple, up from £429, and the cheapest iPhone 4 will cost you £510, up from £499.
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I guess you all know the old saying, Fight fire with fire, let’s just fight the VAT with a VAT of our own.