Google hikes advertising prices in response to digital services tax

By Robert Scammell

Google is passing the costs of the UK’s Digital Services Tax onto advertisers by increasing its advertising prices.

Companies advertising through Google Ads and Google-owned YouTube will be charged an extra 2% – the same rate levied by the digital tax – from November this year.

Announced by former chancellor Philip Hammond, the Digital Services Tax aims to bring in more funds to the Treasury from companies that operate search engines, social media websites and online marketplaces with revenues above £500m.

Google has also raised advertising prices by 5% in Austria and Turkey in response to their own digital taxes. The news was first reported by City AM.

In 2019 Google UK paid £44m in corporation tax on revenues of £1.6bn. Because its business is digital, Google is able to report UK advertising profits in other jurisdictions.

Global digital services tax remains elusive

Some 140 countries are involved in talks to create a global digital services tax. However, the US – where the majority of tech companies affected by the regulation are based – has pulled out of discussions.

A Google spokesperson said: “Digital service taxes increase the cost of digital advertising. Typically, these kinds of cost increases are borne by customers and like other companies affected by this tax, we will be adding a fee to our invoices, from November.

“We will continue to pay all the taxes due in the UK, and to encourage governments globally to focus on international tax reform rather than implementing new, unilateral levies.”

Amazon has also announced that it will pass on the 2% digital tax to marketplace sellers this month. This is likely to see those costs then passed on to consumers. However, eBay has stated that it will absorb the additional cost itself.

Microsoft and Facebook are expected to announce how they will respond to the tax later this month.

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