Anyone who travels or is an expat in Emerging Countries will at some point have to pay more for goods and services than locals just because they are a foreigner. Some local expat-oriented coin this phenomenon as a ___ (nickname for foreigners) tax. In Mexico, for example, it is called a Gringo Tax in Thailand a Farang Tax.
While the issue does sometimes come up in local expat media, I have never it discussed as an issue in the travel media in general.
Yet, I have not seen any issue cause travelers more angst than the tax. I have witnessed travelers nearly come to fisticuffs with locals over this issue dozens of times in my life.
In my opinion, Fifty-Plus Nomads should just accept the tax. I have and am glad I did. However, I understand that this is not easy for everybody. If you can’t just accept the tax, read the below discussion and develop your own strategy ahead of time for dealing with the tax.
¨There is different shopping in Paris than at a bazaar in Istanbul, but they’re all wonderful¨.
What is the Foreigner Tax?
One of the most critical issues for Fifty Plus Nomads is the Foreigner Tax. Merchants and workers take one look at you, and the price of their products or services increases because you are a foreigner. Tourists and expats alike will be expected to pay more locals when they take taxis or rickshaws, visit a local market, or buy souvenirs from ambulatory vendors.
I call this differential pricing the gringo 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 see this most often when visiting tourist sites that attract large numbers of foreigner visitors like the Taj Mahal, the Hermitage Museum, Angkor Wat, and Chichen Itza.
The Foreigner Tax causes many tourists a lot of anger. A dozen or so times in my life I have seen tourists and local vendors come to fisticuffs over this issue. One time I even saw a tourist and a local scream at each other at the top of their lungs over the equivalent of forty cents.
Foreigners will generally not encounter Foreigner Taxes in developed countries. However, I have had taxi drivers charge me than locals in France and Italy.
My Strategy for Dealing with the Foreigner Tax
When I was younger, I used to get upset by the Foreigner Tax. I would haggle aggressively with vendors and, occasionally, even argue loudly and vociferously that the tax was unfair. Sometimes I did not visit sites because I did not want to pay more than locals. (Today, I regret not seeing some of these sites. I regret even more making an ugly scene).
Nowadays, my strategy for dealing with the Foreigner Tax involves:
- Avoiding places where I know that 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 I think 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 me with lousy service, or acted like I was naïve. In these cases, I also usually do not use their services again.
- Visit multiple vendors before buying a large purchase. If you cannot find a low-cost vendor, use a local to buy the product or service for you. Even if you have to pay a commission a local will save you money.
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!
Why I Favor a More Relaxed Approach to the Foreigner Tax
I have become more relaxed over time with the gringo tax because:
Things are Better than in the Past
- Thirty years ago, a lot of vendors would attempt to charge two to three times what locals would pay. Sometimes, they asked for even more money than I would have paid in the US. They also often provided awful service or insisted on even more payment before finishing the transaction. I have not had this happen much lately. Generally, I end up paying around 20-40% more than locals in Latin America and 60% more in the Middle East and Asia.
Sometimes Paying More 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 that they would receive in the US. The average Indian earns 10 to 15% of the average Americans’ salary. Just being able to afford to travel indicates that we have more means than most locals,
- High admission prices for foreigners are often the primary means that the governments have to restore and maintain historical and cultural sites.
- Often the vendors try to provide better service to justify the additional fee and regardless you will pay less than at home. Even with the Foreigner Tax, I generally pay around 50% of the US price in Latin America and 30% in Asia.
Other Reasons to Pay More
- 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 that they have to pay more other locals.
- We bargain for several large purchases in our lives in the US or Canada, like cars and houses. Often the final price that 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.
- Arguing with locals about the Foreigner Tax reinforces the idea that you are an ugly foreigner. (I do not use the expression Ugly American because I have seen natives from many Developed Country argue with Emerging Country locals over Foreigner Tax issues). Saving face and avoiding conflict is very important to most people in Emerging Countries. If you argue with locals, you will also get terrible service in the future and contribute to their negative stereotypes about your home country.
- Most expats and long-term travelers have learned just to accept the Foreigner Tax as part of the cost of living and traveling in the Third World (Emerging Countries).
Some Foreigner Tax Like Situations that Expats Need to Address
One of the most challenging parts of living in Mexico (and most presumably most other Emerging Countries) is that after a while, you began to care for many of the people who work for you, and you find yourself willing to do things to help the workers. In countries like Mexico, where there is not much of a governmental safety net, many employers – even locals—help their employees out of jams. Assisting employees in need helps build loyalty and is accepted behavior. However, sometimes, this can cause problems when people expect more help than you are willing to give.
In addition, vendors often request payment for services before delivery. Almost invariably, they spend the money on something else. As a result, the vendors often delay delivering the service until they have the money to pay for the materials to complete the job.
My Crazy Rickshaw Ride in Mysore, India
One time, when I went to visit the Gandhi Museum in Mysore, India, a rickshaw driver asked me if I needed his services for my return to the hotel. I told him that I would probably spend a few hours at the museum and, therefore, did not want him to wait. (He probably thought I was brushing him off and would return in an hour or so). When I left the museum, three or so hours later, the same rickshaw driver was waiting for me.
I agreed to use the rickshaw drivers’ service. I thought, like most of the rickshaws, he had a motorized rickshaw, and the ride would cost me around $3.
Instead, he pedaled me to my hotel in a glorified bike. The trip lasted an hour and I was jostled on potholed cow paths. (A motorized rickshaw would have lasted a half an hour ride and been much more comfortable).
I offered to pay him the same $3 as a motorized rickshaw. He told me that I was his only customer of the day. When I saw how tired he looked, I give him around $8 instead. I later talked to an Indian who told me that he would have paid $1. Yet, I feel better being generous. At least, I have a cool story to tell at cocktail parties!
Want to Learn More About My Four Most Important Travel Lessons?
The above lesson Dealing with Gringo Taxes is from my class: My Four Most Important Travel Lessons.
The class talks about why I love my life as a Fifty-Plus Nomad because I have learned four lessons on the road. The four lessons include:
- Mixing different types of experiences (independent, group tours, and learning and volunteering programs);
- Traveling to different parts of the world (Emerging and Developing Countries);
- Avoiding Travel Burnout: Church Overload and Backpacker’s Syndrome; Loneliness; Too Much Togetherness; Culture Shock: and Justifying Your Lifestyle
- Having a home base