The Foreigner Tax is Colloquially Called the Gringo Tax in Latin America and Farang Tax in Thailand
“There are very honest people who do not think that they have had a bargain unless they have cheated a merchant.”
Paying More than Locals While Traveling Round the World
One of the most critical unexpected causes of frustration for Fifty Plus Nomads is paying more than locals because you are a foreigner.
Merchants and workers look at you, and the price of their products or services increases because you are a foreigner. Tourists and expats will pay more than locals when they take taxis or rickshaws, visit a local market, or buy souvenirs from ambulatory vendors.
I call this differential pricing the Foreigner Tax. In local, mostly expat-oriented publications, they refer to the phenomenon as the local name plus the word tax. For example, it is called a Gringo Tax in Mexico, and in Thailand, a Farang Tax.
It is seldom officially a tax imposed by a government. Governments do, however, charge foreigners more than locals, on occasion, to visit tourist sites and attend cultural events. You will often see this when visiting tourist sites that attract many foreign visitors, like the Taj Mahal, the Hermitage Museum, Angkor Wat, and Chichen Itza.
Foreigners will generally not encounter Foreigner Taxes in developed countries. However, I have had taxi drivers charge me more than locals in France and Italy.
My Strategy for Dealing with the Foreigner/Gringo Tax
When I was younger, I used to get upset about the Foreigner Tax. I would haggle aggressively with vendors and occasionally argue loudly and vociferously that the tax was unfair. Sometimes I did not visit sites because I did not want to pay more than the locals. (Today, I regret not seeing some of these sites but also making an ugly scene).
Nowadays, my strategy for dealing with the Foreigner Tax involves:
- Avoiding places where merchants will charge me more than locals. For example, to avoid the frustrations of being overcharged, I do a lot of my shopping in chain stores and use Uber rather than local taxis. Ironically, I still sometimes pay more than if I used more local merchants.
- Accepting the vendor’s price or haggling it down by a small percentage (usually between 10 and 20%).
- Paying the vendor what they deserve for the service. Frequently in Merida, I do not ask taxi drivers, for example, what they charge. I pay them what I think they are worth. (Usually about ten to fifteen percent more than they would charge locals). Interestingly they always seem happy with what I pay them. Only once did someone complain.
- Complaining only if the vendors increased the price before completing the transaction, provided lousy service, or acted like I was naïve. In these cases, I also usually do not use their services again.
- If you buy something expensive, compare prices among many vendors before purchasing. If you can’t get a good deal, use a local to buy it. Even if you have to pay a commission, it will still be worthwhile.
In India, I found a different variation on the Foreigner tax: rickshaw drivers insisting on taking me to a souvenir shop. One time, I refused to go to a souvenir shop, and the driver told me that the store owner would give him a free liter of gas for bringing me into the store. If he did not take me to the shop, he would not have enough gas to get me to my destination. We decided that I would go to the store, walk around for five minutes, and then he would take me to my destination!
Good Reasons to Adopt a Relaxed Approach to the Foreigner/Gringo Tax
I have become more relaxed over time with the Foreigner Tax because:
Things Are Better Than in the Past
- Thirty years ago, many vendors attempted to charge twice as much as locals would pay. Sometimes, they asked for even more money than I would have paid in the US. They often provided awful service or insisted on even more payment before finishing the transaction. I have not had this happen much lately. Generally, I pay around 20-40% more than locals in Latin America and 60% more in the Middle East and Asia.
Sometimes Paying More as a Foreigner is Justified
- I feel more empathy for locals than when I was younger. It is not easy to live on the wages they receive. Many times, they are incredibly skilled, educated, and underemployed. I can imagine how I would feel if I had their wages. The average Mexican, for example, makes between 20 and 25% for the same work they would receive in the US. The average Indian earns 10 to 15% of the average American’s salary. Being able to afford to travel indicates that we have more means than most locals.
- For foreigners, high admission prices are often the primary means that the governments have to restore and maintain historical and cultural sites. In addition, it is subsidies from local’s taxes that usually keep these institutions running.
- Vendors often try to provide better service to justify the additional fee, and you will pay less than at home. Even with the gringo tax, I generally pay around 50% of the US price in Latin America and 30% in Asia.
Other Reasons to Pay More as a Foreigner
- Many well-off locals also are charged more for the same services than locals with fewer means. I have frequently had conversations with well-off locals who have told me they have to pay more than other locals.
- We bargain for several large purchases in our lives in the US or Canada, like cars and houses. Often the final price we pay is also based on the sellers’ perception of what the buyer is willing/able to afford. In some industries, like travel, computer algorithms determine the price based on how much you want the service and what you are willing to pay.
- Saving face and avoiding conflict is very important to most people in Third World Countries. Arguing with locals about the Foreigner Tax reinforces the idea that I am an ugly foreigner. (I do not use the expression “Ugly American” because I have seen natives from many developed countries argue with Third World locals over Foreigner Tax issues). If you argue with locals, you will also get terrible service in the future and contribute to their negative stereotypes about your home country.
- Increasingly, expats and long-term travelers have accepted the Foreigner Tax as a fact of life.
My Crazy Rickshaw Ride in Mysore, India
When I visited the Gandhi Museum in Mysore, India, a rickshaw driver asked me if I needed his services to return to the hotel. I told him I would probably spend a few hours at the museum and did not want him to wait. (He probably thought I was brushing him off and would return in an hour or so). Three or so hours later, the same rickshaw driver was waiting for me when I left the museum.
I agreed to use the rickshaw drivers’ service. Like most rickshaws, I thought he had a motorized rickshaw, and the ride would cost me around $3.
Instead, he pedaled me to my hotel on a glorified bike. (A motorized rickshaw would have endured a half-hour ride and been much more comfortable). I jolted on the potholed cow paths for an hour.
I offered to pay him the same $3 as a motorized rickshaw. I gave him around $8 instead after seeing how tired he looked. I later talked to an Indian who told me he would have paid $1. Yet, I feel better being generous. At least I have an incredible story to tell at cocktail parties! He told me that I was his only customer of the day.
Want to Learn Some Good Arguments Against Tipping More than Locals?
Check out this article from playadelcarmen.org. While this article is written for expats and travelers in Mexico, it presents an argument (mainly that overtips cause waiters to ignore local customers and inflates the price of things for locals) that will ring true in many countries.