Australians call the difference between what they and Americans pay for the same technology the Apple tax.
These days the name is unfair to Apple. Once the company was among the worst offenders, today New Zealanders pay a lower mark-up for Apple hardware than for most other companies’ gadgets.
How much is the Apple tax?
Using Apple as an example, the bottom-of-the-range 16GB Wi-Fi iPad costs US$500* in America. Here it costs NZ$800.
Convert our price to American currency and you’ll see we pay roughly US$635. That’s over 25% more than the American price.
New Zealanders have to pay 15% GST. If we add GST to the US price for a fairer comparison and we get US$575.
So, after taking GST into account we pay 10% more than US customers for the iPad.
Maybe we should call it the Dell tax
Apple’s mark-up isn’t too bad. If we apply the same calculation for, say, a Dell XPS 15z laptop which costs US$800 in America and NZ$1614 here, we find New Zealanders pay 40% more than Americans for some Dell hardware.
You can try the numbers with other computers, with printers, phones and all kinds of gadgets. In general you’ll find New Zealanders pay 10 to 40% more than Americans for the same hardware.
Why do we pay more?
I heard plenty of arguments to explain why New Zealanders pay more than Americans for hardware. Some have a ring of plausibility.
Top of the list is: “Supplying a small and relatively remote country is more costly than shipping goods around the US mainland”.
Whatever people say and whatever customers think, our retailers aren’t profiting from higher prices. Or at least their bottom line profits aren’t higher than overseas retailers.
We have more retail outlets per head of population than the US and more retail workers need to be paid off the back of each sale. New Zealand retailers often pay proportionally more rent than their overseas counterparts and I’m told the cost of reaching customers through marketing is higher here too.
Software is the biggest rip-off
Frankly these arguments are blown out of the water when you look at software.
Americans pay US$500 for Microsoft Office Professional sold retail. New Zealanders pay NZ$1039. That’s 25% higher than the US price after accounting for GST.
Those prices are for boxed software, which arguably compare to buying hardware. Those arguments hold no weight when it comes to downloaded software.
The Microsoft tax?
Americans pay US$350 for a Microsoft Office licence card – that is when there’s no physical product. New Zealanders pay NZ$700. Our price is 35% higher after GST.
Online distribution costs are effectively zero, so that 35% is a pure mark-up.
No doubt someone at Microsoft can justify the company’s decision to charge New Zealanders 35% more than Americans for an identical product.
It’s better than it was
Twenty years ago I heard a story about someone who flew from Wellington to Los Angles return, spent a week in decent hotels, ate like a king, visited Disneyland, shopped for a Macintosh and still ended up paying less than the NZ price for his computer. The story could have been made-up, but it sounds plausible. Today the price differences tend to be measure in hundreds of dollars rather than thousands.