No, those two things are orthogonal.

The convention in the US is to compute the tip on the pre-tax amount. If the pre-tax price is $10, a 20% tip is $2 and 8% tax is $0.80, for a total of $12.80.

Now, some of this software has come along and tried to sneak in a change to the formula where the tip is computed on the post-tax amount. They take $10, add 8% tax to get $10.80, and then compute 20% of that for the tip, for a total of $12.96.

They have deceptively changed the tip rate from 20% to 21.6%.

Whether prices are listed tax inclusive or tax exclusive isn't the issue. Even with tax-inclusive pricing like Europe has, it still would have been possible to sneak in a change to the formula for computing the tip.

> They have deceptively changed the tip rate from 20% to 21.6%.

It's simply a bug. I got a suggested tip amount on a bar bill, the other day and it was clearly derived from the total of all the food and beverage, before taxes. It was all there in writing, and the figures were easy for me to check in my head.

Oh, with drinks it's even harder to calculate in the US. The 'typical' tip, regardless of (a reasonable) price is $1 flat. For a $3 domestic, that's a ~33% tip. For a $7 microbrew that's ~14% tip. Even with $10 martinis, $1 is 'typical'. Trying to factor that all in to the tip on the bill makes for a heck of a problem, especially after a few drinks!

I just meant that to simplify literally everything you could just work only in post-tax numbers like the rest of the world does.

Obviously this would indeed increase tip amount, but it would definitely decrease confusion and probably fix itself over the long run if the new tip amount was too big.

Also, at least here in Norway, the service workers have to pay taxes on the tips. How does this work in other countries? It it just a way to dodge taxes for the owners?

Minimum wage laws also applies to the pre-tip salary so it's not really expected most places unless you get exceptional service. I've never seen "pre-calculated" tips either here or elsewhere in Europe.

Some proportion (between 25-75%, I'm not really sure) of restaurants in Britain do this.

At the bottom of the menu it says something like "A discretionary service charge of 10% will be added to your bill [for groups of (4|5|6) or more]"

Then it ends up like this: https://s3-media3.fl.yelpcdn.com/bphoto/28hfOrBSZ1SYPD--tlNU...

I don't like it; it makes the prices on the menu appear smaller than a competing restaurant.

That's because the VAT paradigm obscures the taxes; in US and some other places the amount paid is separated into "cost" and "tax."

It's not really obscured. Actual costs and taxes are stated separately on every receipt or invoice. It's just that the advertised price has to include taxes.

Fair point, thanks for clarifying.

Example receipt from Sweden: https://upload.wikimedia.org/wikipedia/commons/9/9e/Cash_rou...

On the middle one, you can see there are two different tax rates ("MOMS" = VAT), depending on the category of goods.

Here's one from Germany: https://upload.wikimedia.org/wikipedia/commons/2/26/Aldi-Qui...

It also has two VAT rates (MwSt A and B), and each item is marked according to the rate. The yoghurt and müsli has a lower rate than the soft drinks and electronics.

Yeah, and for a really capitalistic reason: you can compare a night at the restaurant with a night at the movie to allocate your budget, wheras in the US you have to know the tax on movie tickets, the tax on food (good luck, theses are defined by town), and the tip you will leave.

Capitalism only work if both side of the transaction have the same information, that's how Stiglitz got his Nobel prize. (another US trope: collecting the Nobel prizes and never reading the papers)