Valve is a company based in Europe, in the Grand Duchy of Luxembourg.
According to EU VAT law, throughout the EU, in sales to private persons, VAT has to be calculated in the country where the good or services are provided, which is Luxembourg. Luxembourg has the lowest VAT rate in the EU at 15%.
Therefore, 1 EUR has to be calculated as 1.15 EUR in the EU, which amounts to 1.48 USD, not 1.15 USD. Given the fact that there is no sales tax or VAT in the US for digital distributions of entertainment software, that means that European customers have to pay more than European customers for games at a price setting whereby 1 EUR is 1 USD. Otherwise calculated: 1 EUR is 0.78 USD, 15% VAT on 0.78 USD amounts to 0.897 USD, therefore Steam steals over 10% from European customers, even though it's a European based company.
From 2015, Luxembourg will raise it's VAT rates to 17-18% (and then it will still be the lowest in the EU, normal would be about 21% on average). I wonder if Steam will raise it's prices for EU customers at that time.
This is partly why Steam isn't as popular in EU as in the US. Generally, games are priced according to the market. For instance, a new AAA game that would cost 60 EUR incl. VAT on Steam, typically costs about 50 EUR incl. VAT on DVD in mortar and brick stores, and costs about 45 EUR on European digital distribution online retailers like mcgame.com or the likes. Then the pricing in mortar and brick stores is also hugely variable from country to country in the EU. Countries that don't have Amazon or Google store or other large US digital distribution shops, like Belgium, are usually a lot cheaper in games than other countries like Germany, that has big US online retail. A game that would cost 50 EUR incl. 19.5 % VAT in Germany in DVD format, would cost 30-40 EUR incl. 21.5 % VAT in Belgium.
So, not only does Steam steal from EU customers in it's pricing, but they also lead to high prices in the US just like any big online retail organisation seems to do. So in Europe for instance, there is the strange phenomenon that computer hardware is much cheaper in Luxembourg or Germany than in Belgium, but at the same time games are much cheaper in Belgium. There are quite a few products with huge price differences between countries in EU, like gas, tobacco, coffee/tea, alcoholic beverages, lemonade, USB flash drives (for instance, a USB flash drive that would cost 6 EUR in the centre of Germany, will cost at least 25 EUR in Belgium because Belgium has a copyright tax on flash memory because the government esteems that anyone buying a USB flash drive or flash memory card will use that for "illegally" copying copyrighted content, and near the border with Belgium in Germany, where Belgians go to buy flash memory because of that stupid tax, that same USB drive will cost 15 EUR, because they see the market opportunity, just like the coffee, tea, chocolate and tobacco shops in Belgium near the German border sell huge amounts of their goods to Germans, because these things are cheaper in Belgium than in Germany. That's just how it is, that's how free economy works. It just seems strange to Americans to have different prices every couple of hundred kilometers because it's a completely different country, but for most EU citizens, it's perfectly normal, after all, a couple of years ago, all of these countries would have their own currency. I would literally always have 3 or 4 currencies in my wallet at all time and still have a huge jar of coins of 8 or 9 different currencies from living in the EU before the EUR came about.
Prices are more expensive when economic factors get larger, like when the EUR came, everything immediately became lots more expensive, because companies scaled up their pricing politics after the US model, where prices are set towards what a customer is willing to pay for something instead of what an item costs plus reasonable profit margin. This is why big online retailers have so much profit in comparison to other sales channels: how do you figure Steam or Amazon can be more expensive than a mortar and bricks store when it comes to games, when the mortar and bricks store actually has so much more overhead. It's very simple: mortar and bricks stores in countries that are left aside by big international online retailers, like Belgium, still have the older competitive model, and they compete against each others prices, whereas in other countries, mortar and bricks stores compete to online prices, but the inverse is also valid: online retailers compete against mortar and bricks store prices, so they set their prices very high in comparison to their overhead.
Think about this: Steam sells in Belgium, where it is illegal to sell with a loss 10 months per year, and this is fiercely enforced with high fines. Still Steam has sales whereby AAA titles can be bought for 5 EUR incl. VAT during those periods, so they are not selling at a loss. That means that when they sell the same game for 60 EUR when it's not on the specials list, they have at least 55 EUR of pure profit on it.