N4

4.10. CAR PRICES IN EUROPE. Sales taxes on car purchases in Europe vary from 0% to

more than 200%. The UK is one of the countries with lowest taxes, whereas Denmark

is one of the countries with highest taxes.

(a) In which countries do you expect consumer prices to be the highest?

(b) In which countries do you expect pre-tax consumer prices to be the highest?

By law, if a consumer buys a car in country x and then registers the car in country

y, the consumer receives a refund from the tax paid in country x and then pays the

corresponding tax in country y.

(c) What is the optimal car buying strategy for a European who does not mind to

purchase abroad?