Google’s new Digital Services Tax fee is another ‘kick in the Googlies’ for online shoppers

Google has announced it is passing the cost of the new 2% UK Digital Services Tax directly to its advertisers from November. The e-commerce delivery specialist ParcelHero says this means that, once again, it will be Britain’s online shoppers who ultimately pay the price.

From November, the internet giant Google will apply the full cost of Britain’s new Digital Services Tax (DST) to all ads on UK Google and You Tube as an additional fee to advertisers. The e-commerce delivery expert ParcelHero says this move is exactly what it warned about when the idea of the so-called ‘Amazon tax’ on online multinationals was first proposed. It warns most companies buying Google Ads services will be forced to pass on the extra fee to their customers, meaning it will be Britain’s beleaguered online shoppers that are left to foot the bill once more.

ParcelHero’s Head of Consumer Research, David Jinks MILT, says that it was inevitable the DST would be passed on to the public. Says David:

‘The news that Google is passing on the cost of the new Digital Services Tax to Google and You Tube advertisers is nothing less than a kick in the Googlies to British shoppers who will, of course, ultimately pay the price. Online sellers need to spend money on Google Ads to keep their products visible. Some companies spend many thousands of pounds a month on ‘pay per click’ (PPC). Every time a shopper clicks on a Google advertising link the seller is charged a fee and the new DST payment will be added to this bill.

‘For example, a UK advertiser who spends £6,000 on Google for clicks in December will pay an additional £120 (representing 2%) in DST fees. That will make their final bill £6,120 plus VAT. In all likelihood, that £120 will be passed on to their customers through an increase in prices.

‘The Government introduced its new Digital Services Tax in April. It argued international e-commerce giants were not paying fair taxes in the countries where their services were purchased. When he proposed the new tax last year, the former Chancellor Phillip Hammond said: ‘This measure will ensure the large multinational businesses in-scope make a fair contribution to supporting vital public services.’  However, as we warned at the time, the international tech giants are simply passing the cost to companies using their services, who then pass it on to their customers.

‘Google is not alone in passing on the tax. This month, Amazon has increased seller fees on its platform in response to the 2% tax increase, while other multinationals, such as Facebook, Apple and Microsoft, have yet to announce their decisions. So far, eBay alone has said it will absorb the costs.

‘The UK went solo when introducing its new controversial Digital Services Tax. Former Chancellor Hammond decided he couldn’t wait for the EU to take action against multinational e-commerce giants. He argued the DST could bring in £500 million a year but, as shoppers moved online during lockdown, its timing proved unfortunate. In August, the Daily Mail reported that the current Chancellor, Rishi Sunak, is already considering scrapping the tax, as he considers it to be “more trouble than it is worth”. Reportedly, it is also an impediment to ongoing trade talks between International Trade Secretary Liz Truss and America, with the US government insisting that the new DST unfairly targets its tech firms.

‘Google has defended its new fee, saying: “Digital service taxes increase the cost of digital advertising. 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. We will continue to pay all the taxes due in the UK, and to encourage governments globally to focus on international tax reform rather than implementing new, unilateral levies.”

‘Austria has introduced a similar but even steeper tax of 5%, so Google has responded by slapping a new 5% fee on ads in that country.

‘The new DST fees are not the only new taxes affecting UK online consumers. In August, following a Treasury consultation paper on business rates, Chancellor Sunak announced that he is considering a 2% levy on all goods sold online. The Government believes this will partially offset the loss of business rates income this year. However, ParcelHero has dubbed this ‘a tax on the frail’, as it will once again be an added cost for housebound shoppers or those still shielding during the pandemic.

‘ParcelHero has repeatedly warned that the UK’s long-suffering online shoppers are being taxed ‘till the pips squeak. In our view, it was inevitable that Google would pass the tax on to its advertisers and that they, in turn, will pass it on to their customers. How else did the Government expect the new Digital Services Tax to pan out?