Whether SONDR® are running your ads, or another agency, we’re in the same boat! All advertisers on the Google UK platform will now be required to pay a 2% tax on top of any advertising spend from 1st November 2020.
“What is the Google Tax?” you may ask… well, it’s the UK Digital Services Tax and it’s a temporary tax on revenues made by the large tech businesses that provide social media services, search engine, or online marketplaces to UK-based users. For companies to be taxed in this way, they must have revenues of more than £500 million, of which £25 million is attributable to UK sales. The ultimate intention is to replace this with a comprehensive global taxation solution, which is currently proving somewhat difficult.
Google has announced that they will soak up all of the cost of this tax… just kidding - they will obviously pass the cost of the UK 2% tax directly on to their advertisers, meaning they will increase the cost of the click/impression and make us all pay the cost, which is very good of them. For advertisers in Austria and Turkey, the tax is 5% so I suppose it could have been worse!
Amazon has also announced it will be passing the cost of the tax on to the sellers on the Amazon platform, whereas eBay has announced it will be absorbing the cost themselves. Go eBay! Further announcements are expected from Facebook.
A 2% tax on your marketing spend could have a considerable impact on your budget, but there are two ways that this can be managed. Option one, keep your budget the same and you’ll have the same level of exposure in terms of impressions and ultimately clicks, but your cost will be 2% higher. Option2 reduce your budget slightly to incorporate the tax, but slightly reduce your exposure. Either way, it’s not ideal, but all of your competitors will feel this pinch too.
As it stands, the tax is here to stay as it’s only due for review in 2025. So, unfortunately, it’s time to decide how you want to give Google an extra 2%.
Don’t you just love the illusion of choice?
If you have any concerns or questions on this subject, feel free to contact us or find out more about our Google PPC services here.