On Tuesday, Google informed its advertisers of new fees that would be charged for ads running in Austria, UK, or Turkey. In these three countries, Google is passing on the new digital services taxes (DST). These fees will be levied at an additional 2 percent in the UK and 5 percent in Turkey and Austria. Moreover, the fees will be subject to any relevant taxes, such as QST, VAT, or GST applicable in the country, and advertisers will also have to pay any taxes valid in these countries.
The DST in the UK has been under development for several years now and was announced back in March. The tax aims to collect revenue from digital companies, such as Facebook, Google, and Amazon, that are worth at least £25 million in the UK and £500 million globally.
However, Google is not the only company that’s announced such a change. In August, Amazon informed its sellers that it’d pass the 2 percent DST in the UK from 1st September. This fee is applicable to monthly storage fees, referral fees, multi-channel fulfillment fees, and fulfillment by Amazon fees.
When such costs increase, they are borne by the customers and, hence, they will be added to invoices from November.
Will Facebook follow Google and Amazon?
While it’s still unclear whether Facebook plans to take this approach and pass these fees to advertisers, it did start passing a 6 percent service tax on ads sold in Malaysia to its advertisers’ invoices from 1st January.
For advertisers, it’s important to prepare for these changes by taking several things into account. Firstly, since the fees will be added on the top of the account budget, it needs to be taken into account during budgeting. For instance, a budget of £100 pounds will incur £2 in DST fees for ads in the UK. This brings the billing amount to £102, in addition to any relevant taxes, such as VAT, that would be applicable in the country.
Additionally, advertisers need to evaluate how much this impacts them. These fees need to be accounted for when selling products and services in any of these countries. Since they will impact the cost-per-acquisition (CPA), you should take a look at your performance and how you can maximize the efficiency of your ad campaigns.
Lastly, advertisers should also focus on their targeting. If, for instance, you’re not serving in any of these countries mentioned above, you need to exclude the people in these locations to avoid the fees.