Regulatory Costs To Be Paid By Google Advertisers

Google has enacted a plan to pass on the cost of digital services taxes in Europe to advertisers instead, according to a Financial Times (FT) report, which will muddy the waters on governmental attempts to take more of the U.S. tech giant’s revenues.

The plan involves an additional fee for advertisements in the U.K., Turkey and Austria, which will cover the cost of regulations in those countries, FT reported. By doing so, the price of an ad will rise by 2 percent in the U.K. and 5 percent in the other two countries, which are the exact rates that digital service taxes have risen to in those areas.

The worry from advertisers and publishers is that the move will further cripple advertising spending already cut off by the effects of the pandemic.

But those countries aren’t the only ones with recent new digital service levies, despite being the ones Google targeted for extra costs. France, for instance, has suspended collection until the end of the year. Google didn’t add any costs in that country.

According to Google, the taxes did have the effect of making digital advertising more costly.

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

Phil Smith, director-general of ISBA, which is the trade body for advertisers, said the new ad costs were “the inevitable outcome” of the U.K.’s attitude toward digital taxation being unilateral. He said the group had always warned the government that the approach could penalize advertisers.

The U.K. has said it won’t be ending the tax on U.S.-based tech companies like Google, Apple and Amazon, which it is using revenues from to help with pandemic-related services.