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Comment by dhosek | Hacker News Reader

Even before I clicked the link, I was sure the answer was Brazil. It's not so much the taxes that raise the prices as the tariffs (which are kind of invisible taxes in that they are paid through higher prices rather than directly—which is part of what made a former president's boasting about raising tariffs somewhat absurd. It seemed he believed that the exporting country paid the price of the tariffs and not domestic consumers in the form of higher prices). I remember that there were plans to build a Foxconn factory in Brazil specifically to manufacture iPhones for the Brazilian market because of the tariffs (I don't know if this ever happened, I think maybe it did?).

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Isn't it referred to as Brazil Cost by economists. The only way to reduce the tariff is to manufacture locally. NOKIA did this and gained significant market share as a result 20+ years ago

I would say that the "Brazil cost" referred by the economists most probably means bribe.

I think it's more likely the huge margins applied to products here.

It’s because it’s harder to do business in Brazil. Reasons listed on the Brazil Cost Wikipedia page:

https://en.m.wikipedia.org/wiki/Brazil_cost

Corruption is one of the items listed.

The term "Brazil's cost" is about the legal overheads, which are much higher than anything due to corruption (which does, indeed, increase the cost of doing business).

The largest component is cascading taxes. There are some rules which allow you to get a discount on taxes of products you sell based on taxes of the components you bought, but in general each step in production and distribution will pay taxes on the incoming values including all previous taxes. That means that you look at a product in a store and think that the price includes 18% state taxes which doesn't sound so bad. But if you could trace it back through the supply chain all the way to mining the raw materials you would see that about 60% of the price is tax.

This, by the way, leads to the ironic situation where poor people pay way more taxes than rich ones even though the law is supposed to implement "progressive taxes". So the poor person is in the 0% income tax bracket but spends nearly everything they earn on stuff with hidden 60% taxes in them. The rich person is in the 35% income tax bracket but only a fraction of that income goes to products while much of their expenses have little to no taxes.

Other sources of "custo Brasil" are losses in transport due to bad infrastructure and crime, having to hire extra people to deal with complex regulations, costs due to delays and things like that.

If your market is large enough and the tariffs are high enough then it seems logical that tariffs will force the companies to manufacture their goods elsewhere to stay competitive and increase revenue.

Short term the tariffs are likely paid for by the exporting country, company and/or consumer (there's a limit to how much you can pass on to the consumer), whereas long term the goods will be manufactured/assembled in another country.

Here's a Foxconn factory near Jundiaí: https://goo.gl/maps/Y4R5VzZeS3cqi49W7 They also have other factories in the country, including in Manaus.

It was inaugurated in 2012 and indeed for a few years did produce Apple devices, specifically iPads, but AFAIK in 2017 they shut down the line: https://diariodonordeste.verdesmares.com.br/negocios/apple-e...

I was sure it would be Turkey, looks like we are the close second. Congrats on your first place Brazil!

Is being 1st or 2nd place in this matter to celebrate? I live in Brazil and this is something that really sucks.

He was being ironic

> which are kind of invisible taxes in that they are paid through higher prices rather than directly—which is part of what made a former president's boasting about raising tariffs somewhat absurd. It seemed he believed that the exporting country paid the price of the tariffs and not domestic consumers in the form of higher prices

Depends on the tariffs. If done correctly, they can be used to protect a local industry in its infancy until it is mature enough to compete on the world stage (assuming you don't stifle its own innovation via these subsidies).

But in this case, Brazil wasn't making an iPhone/Mac competitor

> what made a former president's boasting about raising tariffs somewhat absurd

Wow, how does a president think this?

IME this is one of the most common economic misconceptions that people have, to think that the economic cost of a tax is borne by whoever nominally pays it.

Most people with no economics background will for example think that it's just companies that pay salary related taxes, or consumers who pay VAT. Those are both true in the accounting sense that the money is paid by those respective parties to the government but not in the economic sense of who would have the extra money if there were no tax.

My dad had the same reaction when I told him that we'd pay the extra credit card fees. He said "the merchant pays those" and didn't seem to get my "where do you think the merchant gets the money from?" reply.

While all the money is coming from the customers this changes which customers pay and more and which pay less. The guy buying a whole month of grocery will pay less with (fair) explicit fees, the guy buying a single redbull would pay more.

Personally my problem with credit card fees is that they are generally not advertised and the costumer should easily be able to know how much they are going to get charged even before the checkout or ordering (this obviously applies to non VAT-included prices).

Merchants on the other hand should reject non-profitable payment options (in my country it is quite rude to try to pay a coffe with a visa/mastercard)

Depending on the product and the competition on the market of that product, the merchant might also take the extra fees from their margins rather than raise prices.

Yeah, this argument doesn't always hold water. If a seller could increase their price without affecting their sales volume, why wouldn't they have done so already to generate more profit? The price product of most major companies is at what the company assumes will provide them the most profit in the demand curve. So by increasing the cost for the company with a tax, it doesn't necessarily follow that the maximum profit possible will be one where the tax is entirely passed to the consume.

It’s not, but presumably all substitution products would see a similar tax, so you’re just shifting the supply curve up across the board.

It really comes down to the market dynamics for that particular product and its competitors.

It's the same when you try to buy a house in the US and you have to pay a realtor to represent you, who takes 3% of sell price as commission. You'd then bargain "I already found the house myself, I just need you to draft the offer, can you do it for less", and they'll reply "no, but don't worry, you only pay for the house, and our commission is paid by the seller".

The way houses in the US are sold looks insane from outside. When I last sold a house in the UK I paid the estate agent 1.5%, there were no buyers fees.

I sold my house without any agents in Portugal. They are common and people use their services frequently, but I figured I could do it by myself and pocket the fees.

OP is full or crap or misinformed. Buyers almost never pay any fees for realtors in my area of the US. Unless the seller is trying to rip you off or something. Maybe it’s different on the west coast.

Everyone I know who has bought a house (not selling) has the seller pay the commission. I bought a house 2 years ago and the seller didn’t have a realtor, he paid 3% to my realtor. It’s baked into the price, you don’t pay $500k for a house and then add on 6% or 3% percent commission to pay the realtors. The commission comes out of the sale price.

Where you do think the money for the commission comes from? Houses aren't a fixed-price good where you declare that you're selling a house for $500k and stick exactly to that price regardless of what you're offered. If a buyer without an agent to pay offers you $490k, that's a better offer than one with an agent offering you $500k if it means you don't have to pay that 3%, and the buyer has saved $10k by not having an agent.

No one is forced to use an agent or pay agent fees in the US.

>OP is full or crap or misinformed. Buyers almost never pay any fees for realtors in my area of the US

I think you've missed the point of this comment thread. Head up to great-great-great-grandparent comment:

"IME this is one of the most common economic misconceptions that people have, to think that the economic cost of a tax is borne by whoever nominally pays it. Most people with no economics background will for example think that it's just companies that pay salary related taxes, or consumers who pay VAT. Those are both true in the accounting sense that the money is paid by those respective parties to the government but not in the economic sense of who would have the extra money if there were no tax."

Elsewhere in the thread is the example of credit card feeds which technically are paid for by the merchant, but economically are paid for by the consumers.

Now try to carry these concepts to your Real Estate Agent scenario. I shall leave that as an exercise.

I completely disagree unless your state has some specific details that forced the buyer to pay commission. A buyer should not be paying the commission of any realtor. The seller should have it baked into the price, or they should be fine with losing 3-6% of the sale price after the sale.

There is a labor cost to accepting cash (or, to a lesser extent, checks) that you don't incur when someone pays with a credit card. I recall reading some dubiously sourced research claiming that it costs most businesses more to accept cash than it does to take a credit card[0], which didn't seem that plausible, but it's probably closer to a wash than you would think.

[0]: I think it was this: https://www.businesswire.com/news/home/20180130005244/en/New...

I have seen this argument a lot, but whenever I see a separate price for paying with cash versus paying with credit cards, the price for paying with cash is always lower.

True, but the merchants with separate prices tend to be smaller organizations, since they need to fly under credit card processors' radar to do this. For a mom and pop shop, they may be willing to do the extra labor to make back the 3%, even if it's not something that would make economic sense to pay an employee to do. (Similar to how it's cheaper for you to mow your own lawn on the weekends, even if the money you save is less than your hourly wage at work.) Or they may view labor as a sunk cost and see cash handling duties as a way to decrease idle time for staff.

Cash allows the merchant to pocket a lot more by evading taxes on the income.

The same mechanism works the opposite way for larger employers, where electronic payments cut losses from theft, and the costs required to prevent the thefts.

the purpose of well-thought tariffs is tho incentivize local markets and production, that is how South Korean and Japanese car companies were able to exists.

The two cases where it is almost unconditionally stupid is if there is no chance to develop or grow a local market or if you are reliant on those same countries for your own export (they are most likely going to tariff your products back)

> Those are both true in the accounting sense that the money is paid by those respective parties to the government

Where do you live that this is true of VAT? Everywhere I know of, the retailer is responsible for paying VAT on the products they sell to consumers.

Yes this is true. I thought about this when I wrote it, and the explanation is that as the retailer you just subtract the VAT off your books, and the customer is the one who "paid", all you're doing as the business is counting the money and sending it through to government. So in your accounts you just have this VAT number that appears to be the customer paying the government, but economically it's not quite like that.

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