Google will ramp up advertising fees on firms from the UK, Austria and Turkey by up to 5% from November as US tech giant passes on cost of new digital services taxes to customers
- It follows in the footsteps of Amazon which last month stopped absorbing cost
- Price increases have been met with dismay from the advertising industry
- Two per cent tax applies to digital service companies with over £500m revenue
Google has announced it is offloading the cost of digital services taxes from three European countries on to its advertisers.
From November, companies from the UK, Austria and Turkey which promote themselves on the tech giant’s platforms, such as Google Ads and YouTube, will face increased fees.
The charge will be in line with levies ushered in by the individual national governments.
British advertising fees will rise by 2 per cent, while Austrian and Turkish advertisement fees will go up by 5 per cent.
Google’s decision to make advertisers bear the cost of the levy follows in the footsteps of Amazon, which last month said it would stop absorbing the increased costs and instead pass it on to sellers.
But hiked fees have been met with dismay from advertisers, who claim it is another blow to the hard-hit sector.
Google has announced it is offloading the cost of a UK digital services tax on to its advertisers, which will face price rises of 2 per cent from November (London office in King’s Cross pictured)
Defending the decision, a Google spokesperson told City AM: ‘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.’
Since the government introduced the tax in April, tech corporations have been grappling with how to plug the price gap.
Amazon initially footed the tax itself while it tried to broker a deal with ministers which would not see its sellers impacted.
But when talks ended in stalemate, it announced that it would be increasing fees for UK sellers by 2 per cent.
Search engines, social media and online marketplaces with global revenues of over £500million and UK revenues of £25million on digital services have all been slapped with the levy.
Google’s decision to make advertisers bear the cost of the levy follows in the footsteps of Amazon (logo pictured), which last month said it would stop absorbing the increased costs and instead pass it on to sellers
The UK tax was announced by then-Chancellor Philip Hammond in the 2018 Budget, but only came into force this year and is only supposed to be temporary until an international standard is thrashed out.
The government claims it will clamp down on taxes on profits being paid in countries with lower rates.
But, as tech companies are increasingly moving to transfer the costs, advertisers have called on ministers to safeguard the industry.
Reacting to the announcement from Google, Phil Smith, director general of the trade body ISBA, said: ‘While this is disappointing news for our members, it is the inevitable outcome of the UK’s unilateral approach to digital taxation.
‘We have been consistent in warning government of the potential consequences of this approach, including the risk of an increase in costs to advertisers in the UK market.
‘With further headwinds from government hitting the advertising sector in the coming years, it’s time government proved that they recognise the importance of the sector to the economic recovery.’
Google paid only £44million in corporation tax in the UK last year while its staff in Britain earned an average of £234,000 per person.
Its UK arm spent more than £1billion on pay and bonuses in the year to the end of June 2019, up by a quarter from the £829million figure in the previous year.
Google’s UK operation is mainly used as the marketing and sales division of its European operation, which is headquartered in Dublin, where taxes are lower.