How Will The UK’s Digital Service Tax Affect Google Ads Advertisers?

Google is charging advertisers in the UK, Austria and Turkey 2% more from November 1, as it bats the expense of new digital services taxes (DST) back to advertisers. The tech giant says that extra fees will apply in the three nations from this autumn to cover the extra cost of regulation there.

The government’s 2% tax on search engines, social media platforms and online marketplaces which derive value from UK-based users kicked in this spring. Now the search juggernaut is passing it on to those advertising via its YouTube and Google Ads.

Its announcement earlier this month follows Amazon stating it would be doing the same to recuperate the tax from third-party sellers on its platform, while Facebook (estimated UK ad revenue £4.2bn) is thought to be the next to follow suit. There’s also been speculation that Microsoft and eBay could be next in line.

Google said: “We will continue to pay taxes due in the UK and will be adding a fee to invoices from November, like other companies affected.”

The corporation reported making £1.6bn last year, on which it paid £44m in UK corporation tax.

In June, the United States threw proposals for a global tax framework for tech firms into disarray after pulling out of talks with European countries on the issue. Despite this, the UK insisted it would press ahead with the DST.

The levy applies to firms with a worldwide income of over £500m of which more than £25m comes from UK-based users. The first £25m is exempt from the new duty, which applies to adverts seen by UK users, wherever the advertiser themselves is based.

So what happens now?

We could argue the moral rights and wrongs of Google’s actions and taxation all day. But, ultimately, the reality is that advertisers will have to pay up, pull Google Ads, pass on the cost to customers or just accept that sales via Google Ads will start to make less money.

Alternatively, you could aim to make your campaigns more efficient and reduce spend while maintaining the same levels of sales. But given that Google Ads is such a dominant player in the Search Engine market, it would seem unlikely that we’ll be seeing mass ditching of the platform.

How we can help

Front Page Advantage has extensive experience of managing Google Ads campaigns, and can assist you in maximising efficiency at a time when you need it most. Talk to us about how we can help you minimise the impact of this new levy.