VAT = Value Added Tax.
By law, in Europe, all prices you see at stores have VAT included. The price on the tag is the price you pay, unlike USA where taxes are calculated when you pay.
This is one of the reasons why some Europeans bitch so much about getting ripped off, they're comparing apples to oranges. Well, they're still right in that most things are more expensive nowadays, but the rip off is nowhere near as big as a direct currency conversion makes it seem.
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