Mar 30th 2012, 5:06:31
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.
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.