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Can google charge 2% DST from the advertisers?

Is it fair for google to charge 2% extra for DST (Digital Services Tax) direct from the advertisers?

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The HMRC has levied DST (2% of the turnover) on digital services like google advertisments, that's understandable, however, google has decided to add this 2% to the advertiser's bill. Now this gives rise to a few burning questions:
a) This tax is not chargeable for the first £25 Million of the annual turnover, so if they charge it from all customers, they're making a windfall income of £500K every year. So is it fair to charge it to their customers directly?

b) This is a tax of unique nature with both the direct and indirect attributes. Direct because this is not technically recoverable from the end-user and indirect because it's computed based on your turnover and not profits. Another reason to question the direct mode of recovery from their clients.

c) Would it be ethically fair on google's part to mention this tax like an additional cess to the advertisers, rather than increasing their prices overall to cover these additional expenses? That too without factoring in the £25 Million annual DST free turnover allowance they will be enjoying.

Looking forward to some opinion, thanks in advance.

Replies (10)

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By Justin Bryant
03rd Sep 2020 11:13

These huge tech companies are now so powerful that they can basically do whatever they like (see recent Private Eye edition that sums up the situation nicely).

See also: https://www.taxation.co.uk/articles/amazon-passes-on-the-new-digital-ser...

https://www.theguardian.com/media/2020/sep/01/googles-advertisers-will-t...

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By williams lester accountants
01st Sep 2020 15:53

Like any other business, they can charge what they believe the market will bear and it is up to the advertisers to decide if they are happy to pay the increased fee or move on to some alternative options......

I don't see a problem here, no one is forced to use the Google ad services.

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Replying to williams lester accountants:
Mohit Baheti
By camohitbaheti
01st Sep 2020 17:04

Thanks William, what you said is technically correct, however, this is a conflict between the letter of law and the spirit of law. Here the spirit of law says, that these tech giants have to pay taxes from their profits, however, they're simply passing on the burden by quoting the tax. I'm not completely against them doing this either, however, this could have been done simply by doing a proportionate price hike, that too, after factoring the savings reaped due to the £25 Million allowance they're eligible for.

What they've done is just like a sole practitioner writing a letter to his clients about increasing the fees by 20% when he starts paying taxes at the higher rate.

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Replying to camohitbaheti:
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By paul.benny
01st Sep 2020 17:18

The "saving" you refer to is £500,000. Applied across their total UK revenue, it would probably reduce the price increase to 1.9999%.

I'm sure you add VAT to the fees you charge your clients, and if the rates is increase, I don't suppose you will absorb the increase for your clients who are not registered.

As for spirit vs letter of the law, good luck trying to convince a judge of that the spirit should take precedence.

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Replying to paul.benny:
By kenny achampong
01st Sep 2020 20:00

I think it's the brazen-ness of it. They could have just said 'due to Covid we are sorry but we need to increase our fees by 2%'

But what they are doing, is sticking two fingers up to the government and saying we arnt paying any more UK tax (which is what the government were trying to do), and so your UK businesses will be paying it, and we will make a bit of a profit on it too just for good measure.

Maybe a banking style windfall tax would be a better idea, but they would probably just add a '25% windfall tax supplement' on all their invoices. They've got a monopoly so don't really care.

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By shafi2020
01st Sep 2020 16:25

The question here is. Are they really allowed to pass on the tax to the consumer? I dont think so. The idea of the tax is to get big.companies to pay from their profits!!!!! But wait...theyre not paying. Its us advertisers paying!!!! Get it?

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By AdShawBPR
03rd Sep 2020 12:13

Just as any company will factor corporation tax into it's pricing metric, Google will have to factor this cost in too. I don't have a problem with that per se (we can't have it both ways and insurance companies do the same with IPT) but adding a line on an invoice to say 2% added for DST - if that's what they do - seems misleading at best and I would be surprised if they were allowed to do that.

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Replying to AdShawBPR:
Jack-O-Lantern
By TeYoo
01st May 2021 16:51

"but adding a line on an invoice to say 2% added for DST ..."

Well, according to my Google Ads invoice/statements, that is exactly what they are showing.

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Replying to TeYoo:
Mohit Baheti
By camohitbaheti
01st May 2021 17:06

That's the level of brazenness they have in today's world

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