This week Google has announced that it will charge a 2% fee on all UK served adverts from the 1st of November. This could have a few different implications for your company as Google looks to help alleviate the cost of the new ‘Digitial Services Tax’.
A Closer look at the Google Ads Digital Tax Fee
The first thing to note, this is an unusual move by Google. The company do not usually increase the costs for customers without a good reason. As the market leader, the company has a lot of control over the industry and even offered support to advertisers to help alleviate the damage done by the COVID-19 pandemic.
New tax impacts social media, search and online market places
The reason for the hike is due to the new digital services tax introduced by the UK government back in April
. The tax is set to hit all of the big tech companies with the 2% tax being charged on ads served in the UK; including social media, search, and online market places. The tax is set to be a burden on Google who will likely see somewhat of a hit into the companies profits.
Governments have looked at different ways to tax big tech companies
The introduction of the charge may have been a way to get money back from the big tech companies who have been somewhat infamous for their lack of tax payment. In 2019 Google paid £44m in corporation tax on revenues of £1.6bn. This is due to the fact Google is a digital business and can report their earnings in other jurisdictions.
Despite the intentions, many feel that it will simply add an extra burden on small to medium-sized UK businesses. We are and may see more digital businesses passing the cost on to advertisers as a way of protecting their bottom line.
The other major search engines could follow and Amazon has already increased the cost of advertising on their platform in line with the new taxation. There have been talks of making a global digital tax between 140 countries, however with the US pulling out (and with it the main tech giants) the deal is unlikely to go ahead any time soon.
What should you do with your accounts?
We would currently suggest not increasing or decreasing the budget on Google Ads or other paid search accounts; there are always ways to grow and we will be working to develop solutions that can help you stay profitable on the digital platforms.
For more information on the new digital tax and the implications for your business, give us a call or drop us an email.