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Estd 4.22.2023
Below is our answer based on the principles discussed in our pricing strategy book, Price to Scale.
Direct Answer:
For regions like the EU and UK where VAT/GST laws often require tax-inclusive pricing—even for B2C offerings—it is generally best practice to display prices with all applicable taxes included. This approach avoids sticker shock at checkout and helps maintain pricing transparency for international customers.
Key Points from Price to Scale:
• Transparency Drives Trust:
Our book emphasizes that clarity is critical. Whether you’re including taxes in the initial price quote or adding them at checkout, transparency is the key. When prices are clearly labeled—such as “VAT included” or “plus VAT”—customers know exactly what to expect. This becomes even more important in markets with stringent regulatory requirements (e.g., EU consumer law).
• Localizing Your Approach:
For consumer-targeted (B2C) channels in the EU/UK, legal standards and customer expectations typically require tax-inclusive pricing. Including VAT in the displayed price minimizes confusion and aligns with local practices. In contrast, in some B2B scenarios, prices might be displayed net of VAT, with the tax cost added later. However, even in this case, it is helpful to clearly indicate this breakdown on your pricing page.
• Practical Recommendations:
- Make sure your pricing page’s language explicitly states whether taxes are included.
- Use localized pricing strategies that adjust for the customer’s region, ensuring that the tax treatment matches legal requirements and customer expectations.
- Consider interactive pricing displays or notes that explain any variations so prospective customers aren’t caught off-guard during checkout.
Summary:
In Price to Scale, we advocate for a transparent, localized pricing approach. For regions like the EU and UK, the best practice is to include VAT in displayed prices for B2C offerings (with clear labeling), while for B2B you may display net pricing if appropriate—but always with clear communications. This helps avoid confusion, builds trust, and keeps you aligned with regional requirements.
This approach underscores our core philosophy in the book: clear communication and transparency are critical for effective pricing strategies.