The Nicest Two Words in Europe: Tax Refund : Shopping: Americans can recoup double-digit taxes on many purchases. The hitch is, you have to ask.

As a group, budget-conscious travelers usually pay attention to double-digit discounts. And as a somewhat larger group, Americans tend to be reluctant taxpayers.

Yet every year, thousands of American travelers in Europe pass up the chance to legally dodge sales taxes. Are we intimidated? Confused? Ignorant?

Yes.

The taxes that more of us should be watching are known as value-added taxes, or VATs, which essentially are the same thing as retail sales taxes in the United States. In a few years, they may become more consistent throughout the European Community, but right now they vary by country. The key common element is that with a bit of paperwork, they’re usually refundable to foreigners, either at the airport upon departure or by mail in following weeks.

By one estimate, Americans will spend $1.5 billion on retail purchases in Europe this year, and many of those purchases will include VATs of as much as 33%. Though no one can be sure exactly how much in potential refunds is going unclaimed, European tourism officials agree that it’s a substantial number.

“A lot of people, it seems, don’t bother (to collect refunds),” says Mary Kay Hartley, press and trade officer for the Italian Government Tourist Board.

Among her clients, says travel agent Amaris Bryer of Travel Ticket in Encino, “most people don’t buy enough to make it worthwhile. . . . They don’t make it real easy on you.”

The amount that is being claimed by determined travelers offers a hint of how big the VAT pot is. Europe Tax-free Shopping System, a Norway-based company that operates programs for obtaining VAT refunds, guesses that American travelers will collect about $80 million in VAT tax refunds this year.

So why don’t more travelers collect? One factor is that many merchants and foreign governments aren’t in a big hurry to give back money, and VAT refund programs remain complicated and relatively under-publicized. Another factor could be European pricing practices: Most stores there include the VAT in their price-tag figures instead of adding the tax on at the register, as American merchants do. Without that visual reminder, many travelers from the United States don’t stop to think about how much of their money is going to taxes.

“Before you buy, make sure,” counsels Bedford Pace of the British Tourist Authority. “Because if you’re buying a substantial amount, it does add up.”

Some steps for travelers to take:

* Ask what your destination country’s value-added tax rates are. Often they vary by type of goods. Belgium adds an average of 19% in VAT levies to merchandise costs, but for jewelry, electronics and other luxury items, the figure rises to 33%.

* Inquire about purchases that are excluded from refund policies. Many countries offer no refunds on groceries, cigarettes or services--which includes the hotel and restaurant bills that make up the bulk of most tourists’ expenses.

* Find out if there is a minimum-purchase amount per merchant in order to be eligible for a VAT refund (there usually is), and if it is uniform among all merchants. In Finland, the minimum is roughly $18 spent in one store, but individual merchants are permitted to set a higher number. In France, the figure is more than $350. In England, merchants can set their own minimum-purchase figure, and they are not required to participate in VAT refund programs. * Once abroad, carry your passport when shopping. You’ll need it to prove you are a foreigner and thus eligible for VAT refunds. (But keep that passport tucked away and secure from pickpockets.)

* If you feel confident in your merchant, consider having your purchase shipped directly to the United States, which circumvents VAT levies altogether and requires no further paperwork.

* Pay close attention to numbers. The United Kingdom quotes its VAT rate at 17.5%. By that it means you should expect $17.50 in taxes on a purchase that otherwise would cost $100. (It does not mean that $17.50 of every $100 purchase is taxes.) Thus, when translated into potential savings for consumers ($17.50 off on a purchase of $117.50), the refund, or savings, works out to only 14.9%.

There are other subtleties. In Sweden, the price you see on most merchandise is 17.3% taxes. But refunds vary from 15% to 17%, depending on the size of the bill. Swedish tourism officials were ready and confident with these details when I called, but many tourist office representatives are vague on such subtleties, and if specifics are important in your pre-trip preparations, you may be better off bypassing a country’s tourist office and calling its U.S. consulate or trade commission instead. (Keep in mind that VAT rates and restrictions change often, and that some information in this column could be rendered out-of-date before long.)

* When shopping, keep an eye out for VAT-related signs, which indicate that the business is affiliated with a tax-refund-simplification program. Officials of the Norway-based European Tax-free Shopping program claim 60,000 member merchants in Europe. Some major department stores, hoping to woo foreign shoppers, offer their own on-the-spot VAT discount programs.

* Whether you’re buying from a store with prominent VAT signs or not, ask whether the store provides VAT refund forms. If the store personnel can’t provide a form and fill out the necessary portions, you may want to shop somewhere else in order to qualify for a refund. (Note, too, that different terms are used for the refund forms in different countries. In France, for instance, the VAT initials translate to TVA and the form is known as an “export sales invoice.”)

* On leaving a country, give yourself time for wrangling at the airport or train station. Plan to show your merchandise and refund forms to customs officials (who stamp the forms) before checking any merchandise through in baggage. Most airports, rail stations and major border crossings now include tax refund desks, where travelers can produce their stamped forms to claim refunds in local currency or as credit to a charge card account. In some cases, however, travelers must wait for their refunds by mail--a process that takes several weeks or longer.

* Even if you’ll be receiving your refund by mail in the United States, it’s vital to get your refund forms stamped by customs officials before you leave the country you’ve been shopping in. If a traveling shopper returns to the United States without getting refund forms stamped, “there’s little or nothing that can be done,” says Christopher Thorpe of the French Government Tourist Office.

* If you receive a refund by mail, beware the fees U.S. banks charge for cashing foreign-currency checks--charges routinely surpass $15. Instead, consider using a Thomas Cook Foreign Currency Service office (213-624-4221; there are several offices in Los Angeles and neighboring counties), where foreign check-cashing charges run $3.50 for checks of up to $350, 1% of the check amount beyond that; or the Los Angeles office of Ruesch International (310-277-7800), an international exchange company that charges $2 per check cashed.

* Expect deductions from your refund. Merchants, tax-refund-simplification companies and governments routinely deduct fees to cover processing costs. For a free flyer on Europe tax-free shopping, write to Europe Tax-free, Box 9012, East Setauket, N.Y. 11733.

* Don’t complain to Europeans about how troublesome the VAT refund process is. The United States offers no such tax refunds to foreign visitors buying goods in this country.

* Prepare for advances in European cooperation to change the rules of the VAT game. Already, in theory, an American visiting England, France and Italy can wait until departure from the last of those E.C. countries to have all his or her VAT forms stamped. (In practice, I wouldn’t trust that all Europe’s customs officers are up to date. I’d go ahead and get stamps every time I leave a country.)

The following list of VAT rates was compiled by Europe Tax-free Shopping. Unlike the figures used by many tourist offices, these rates are based on the percentage of the total sales price that is taken up by value-added tax. (Thus, the figure for the U.K. is 14.9% and not 17.5%.) Furthermore, refund amounts are likely to be slightly lower than these figures because of deductions for processing.

COUNTRY STANDARD VAT

Austria 16.7%

Belgium 16.3

Denmark 20

Finland 12-16

France 15.7

Germany 13

Greece 15.3

Italy 12-36

Luxembourg 13

Netherlands 13.8

Norway 16.7

Portugal 14.5

Spain 13

Sweden 17.3

United Kingdom 14.9