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Why does the PlayStation 4 cost $1,850 in Brazil?

The PlayStation 4, which goes on sale in Latin America on Nov. 29, runs only $399 in the US 鈥 but for the average Brazilian, it will cost two months' salary.

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Rick Scuteri/AP Images for Amazon
An Amazon Fulfillment Center preparing for its Release-Date Delivery of the Sony PlayStation 4 Launch Edition, in this image released on Tuesday, Nov. 12, 2013. Gamers in Brazil not only have to wait an extra two weeks for the release of the new PlayStation 4, which goes on sale November 15 in the US, but it will cost them 4.5 times the price.

It鈥檚 not easy being a gamer in Brazil. Not only do you have to wait an extra two weeks for the release of the new PlayStation 4, which goes on sale tomorrow in the US, but it will cost you 4.5 times the price.听

It鈥檚 cheaper to buy a roundtrip plane ticket from Rio de Janeiro to Miami or New York City, plus the PlayStation 4, rather than purchase the console new in Brazil.听

Taxes are the main reason, in a sign of how Brazil鈥檚 astronomically high import fees and mind-numbing tax codes have created a market that encourages rule-breakers, discourages equal market access, and sends Brazilians shopping abroad. Brazilians spent a record $2.1 billion on foreign trips in September, 听

鈥淭his kind of taxation is not intelligent, it stimulates a kind of black market,鈥 says J煤lio de Oliveira, a lawyer with Sao Paulo-based tax firm Machado Associados, which advises multinational companies such as Johnson & Johnson and Colgate on Brazilian tax code. 听

The high tax burden is meant to finance public spending for social security benefits and welfare, but it also creates barriers to business and equal access, says Jos茅 Roberto Afonso, a tax lawyer and technical consultant to the Brazilian Senate.听

鈥淚 am much more concerned about the poor quality of the taxes than the sheer size of them,鈥 he says. 鈥淭hey compromise competitiveness and social justice.鈥澨

PlayStation 4, which goes on sale in Latin America and Europe on Nov. 29, will in Brazil cost $1,850 versus $399 in the US, as . For your average Brazilian, that鈥檚 .

Mark Stanley, Sony general manager for Latin America, explained in an that 63 percent of the Brazilian price (or about $1,165) is from Brazilian taxes, and another 21.5 percent is from transfer costs. 听

Some of the costs and taxes on the Playstation break down as follows, says Mr. Oliveira:

  • $468 base cost of PS4 upon arrival in Brazil
  • $445 in federal excise taxes
  • $147 in federal social taxes
  • $446 for state taxes
  • $281 to the retailer

Gamers have听responded听with incredulity, outrage, boycott threats, and black market strategizing. Indeed, on Craigslist right now, an unidentified seller is offering to bring back a PlayStation 4 from Texas for the discounted price of $943.听鈥淚 live in Botafogo and we can talk if you're interested,鈥 according to the ad from a seller in Rio de Janeiro.听

Expats living in Brazil are often asked to transit goods back from their countries.

鈥淕enerally speaking, anytime I go back to the US people ask me to buy them something,鈥 says an English teacher in Ro de Janeiro, declining to be named for fear of Visa troubles. He says he has posted a PlayStation 4 sale ad on Mercado Livre, the Brazilian equivalent to eBay, and received numerous responses from all ages,听including听parents听hunting听for the console as a Christmas gift.

鈥淚t鈥檚 smuggling,鈥 he admits of the scheme. 鈥淵ou鈥檙e acting like an electronics mule.鈥澨

Phones, cars, and bikes, too

PlayStation is just one of many here. The new Xbox will cost $1,016 versus $500 in the US, according to Microsoft. Apple鈥檚 iPhone costs about twice as much in Brazil as in the US, in part because the California company听lacks contracts with any Brazilian mobile operators.听

Price-tags for automobiles are also eye-popping: a Jeep Grand Cherokee costs $89,500 here, compared to $28,000 in the US, while Chrysler鈥檚 Dodge Durango SUV costs $95,000 versus $28,500 in the US. Cars have a 32 percent import tax, which is low compared to the 40.5 percent import tax on bicycles, according to a .听

There鈥檚 arguably a method to Brazil鈥檚 tax madness. A company can get around the import tax by building domestic production facilities, which adds jobs, boosts the economy, and increases a product鈥檚 accessibility.听

That鈥檚 already happening in some sectors. In October, Mercedes-Benz was only the most recent automobile manufacturer to announce it would to bypass the nation鈥檚 steep import taxes. Volkswagon, Audi, and BMW had already announced similar plans to tap into the world鈥檚 fifth-most populous country.听

But analysts doubt whether Brazil鈥檚 high import fees actually stimulate investment. Mr. Afonso, the tax lawyer and also a researcher at Sao Paulo-based think-tank Funda莽茫o Get煤lio Vargas, says multinational companies are more likely to avoid Brazil altogether.听

鈥淭he decision to invest is driven by the prospect of profit,鈥 he says, 鈥渘ot by the size of the tax benefit.鈥澨

Marcos Valois, an avid gamer in Rio de Janeiro, says he鈥檒l stick with his old PlayStation 3 for now.听

"Sony said it doesn鈥檛 want to sell the PlayStation at this price. I believe it but I don鈥檛 believe it,鈥 says Mr. Valois. "Everyone is making money in Brazil. The sad thing is people will pay. 鈥 It鈥檚 impossible, but I want it."听

Oliveira, the tax attorney, has another solution for his 12-year-old son, who is also an avid gamer.听

鈥淗e wants a PlayStation 4, but I told him that he has to wait for the price to go down in six months,鈥 says the father. 鈥淚t鈥檚 better for his education to learn to wait.鈥澨

Editor's note: A previous version of this story misstated the population of Brazil.

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