On the 1st April 2020, the UK introduced a new Digital Services Tax (DST), which may have gone a little under the radar due to COVID and the way 2020 is panning out. Although it was not specifically intended to, it is likely to affect all advertisers that use digital advertising platforms, so it is important to be up to date on what is happening now, and what’s next.
What is it?
In its simplest terms, the DST is a 2% tax that is charged on revenues made by large businesses (£25m+ revenues in the UK) which provide social media, search engine or online marketing services to UK based users. You can read the full details of the tax here: https://www.gov.uk/government/publications/introduction-of-the-new-digital-services-tax/introduction-of-the-new-digital-services-tax
Who does it affect?
In theory, the tax is due to companies such as Google, Amazon, Facebook, Microsoft and so on (companies that make large revenues from UK users). However, it’s becoming apparent that advertisers and other businesses are likely to foot the bill.
Back in July, Amazon announced changes to various marketplace fees – raising them 2% for UK sellers.
What about Google?
On the 1st November 2020, Google will also begin charging new fees for ads served in the United Kingdom (on top of Turkey and Austria, to cover changes there too).
As of the 1st November 2020, we will begin adding a fee to your next invoice or statement for ads served in these specific countries:
- Ads served in Turkey: a 5% Regulatory Operating Cost added to your invoice or statement
- Ads served in Austria: a 5% DST Fee added to your invoice or statement
- Ads served in the United Kingdom: a 2% UK DST Fee added to your invoice or statement
What does this mean for advertisers?
Less ad spend or plan for bigger bills – this is the decision advertisers on Google Ads are going to have to make.
- Less Ad Spend – aim to reduce ad spend by 2% to cover the fee from Google – allowing you to come in on budget.
- Plan for Bigger Bills – carry on as you are and be ready to find an additional 2% when it comes to paying invoices.
This will be bad timing for some businesses that will be relying heavily on advertising efficiencies to push them through the tough trading conditions that 2020 has imposed on them.
You can read more about the country specific fees that Google are imposing here: https://support.google.com/google-ads/answer/9750227
Google have already suggested that although their other products (like DV360) are currently not adding this fee, it is certainly on the roadmap.
Advertisers will be pleased to know that Facebook has decided not to pass on the fee, although this will now add to the complexity of the situation around budgeting and billing, with some platforms adding fees, and some not.
If you have any questions or concerns about the new government regulations regarding Digital Services Tax, please get it touch with one of our helpful team members today.