And, should advertisers or platforms bear the burden of digital service taxes?
Search Engine Land’s daily brief features daily insights, news, tips, and essential bits of wisdom for today’s search marketer. If you would like to read this before the rest of the internet does, sign up here to get it delivered to your inbox daily.
Good morning, Marketers, who should foot the bill?
More accurately, who should pay for digital service taxes (DST)? Earlier this week, Google announced that it would be passing on a 2% “regulatory operating cost” surcharge to advertisers’ invoices for ads served in India and Italy — the company is already doing this for ads served in Austria, Turkey, the UK, France and Spain.
These fees are imposed by regulators on companies that sell ads (e.g., Google, Facebook, Amazon, etc). “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,” a Google spokesperson told the UK’s City A.M back in September.
It’s true. One way or another, taxes imposed on companies usually end up getting paid by customers. If the motivation behind these taxes is simply to bring in more tax revenue, then it probably doesn’t matter to regulators whether a platform or its customers are paying. But, the thresholds for these taxes seem to suggest that large businesses are the target.
Take, for example, the UK’s DST thresholds: a company must make more than £500 million in global digital services revenues and £25 million in UK digital services revenues within a 12-month period to be subject to the tax.
While encouraging competition may not be a primary driving force behind these DSTs, it’s hard to imagine that it’s not a related subject, given the criteria above. Either way, taxes increase the overall price of a good or service, which affects how much of it we can buy, and that could have real implications for businesses that rely on advertising to generate revenue.
I’m still doing my research on this topic, and I’d love to hear your opinion. Send your thoughts to gnguyen@thirddoormedia.com(subject line: My two cents on that 2%).