Early in September, Google announced that it will be passing on the costs of the new Digital Services Tax onto advertisers, meaning that click costs will be rising by 2% because of this. Instead of taking a 2% hit, Google decided that advertisers should pay the price.
The UK digital service tax was announced back in March, and it exists in order to collect revenue from digital companies which earn over £500 million in revenue around the world, and £25 million+ in the UK. This includes the likes of Google and other major online platforms such as Facebook and Amazon.
The HMRC describes it as:
Large multi-national enterprises with revenue derived from the provision of a social media platform, a search engine or an online marketplace (‘in scope activities’) to UK users.https://www.gov.uk/government/publications/introduction-of-the-new-digital-services-tax/introduction-of-the-new-digital-services-tax
From April 2020, the government will introduce a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users.
Beginning on the 1st of November, anyone using Google Ads will be charged an additional fee to account for the digital services tax – or DST.
In the UK, this is an extra 2%. However, count yourselves slightly luckier than those in Austria and Turkey, where it’s an extra 5% fee.
The new fees will also be subject to taxes and VAT. You can read more about this on Google’s help page.
Amazon is also passing on this fee to sellers using the platform. This applies to referral fees, fulfillment fees and storage fees.
In terms of what advertisers need to do – there’s not much you can do aside from budget for these changes. If your budget is high, then this will obviously make more of a significant change to how much you spend and what your cost-per-acquisition will be going forward.
If you have any questions about this new tax, or want help on optimising your Google Ad campaigns, get in touch with the team at Xanthos who will be more than happy to help.