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

It’s 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. 

It’s 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. 

Taxes are the main reason, in a sign of how Brazil’s 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, according to the Central Bank. 

“This kind of taxation is not intelligent, it stimulates a kind of black market,” says Júlio 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.  

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 José Roberto Afonso, a tax lawyer and technical consultant to the Brazilian Senate. 

“I am much more concerned about the poor quality of the taxes than the sheer size of them,” he says. “They compromise competitiveness and social justice.” 

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 Sony announced Oct. 17. For your average Brazilian, that’s two months' salary.

Mark Stanley, Sony general manager for Latin America, explained in an Oct. 21 blog post that 63 percent of the Brazilian price (or about $1,165) is from Brazilian taxes, and another 21.5 percent is from transfer costs.  

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 responded 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. “I live in Botafogo and we can talk if you're interested,” according to the ad from a seller in Rio de Janeiro. 

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

“Generally speaking, anytime I go back to the US people ask me to buy them something,” 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, including parents hunting for the console as a Christmas gift.

“It’s smuggling,” he admits of the scheme. “You’re acting like an electronics mule.” 

Phones, cars, and bikes, too

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

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’s 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 survey by consultancy IHS Automotive in Brazil. 

There’s arguably a method to Brazil’s 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’s accessibility. 

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

But analysts doubt whether Brazil’s high import fees actually stimulate investment. Mr. Afonso, the tax lawyer and also a researcher at Sao Paulo-based think-tank Fundação Getúlio Vargas, says multinational companies are more likely to avoid Brazil altogether. 

“The decision to invest is driven by the prospect of profit,” he says, “not by the size of the tax benefit.” 

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

"Sony said it doesn’t want to sell the PlayStation at this price. I believe it but I don’t believe it,” says Mr. Valois. "Everyone is making money in Brazil. The sad thing is people will pay. … It’s impossible, but I want it." 

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

“He wants a PlayStation 4, but I told him that he has to wait for the price to go down in six months,” says the father. “It’s better for his education to learn to wait.” 

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