2% tax? We’re too big for that, says Google

Google Ads users may have spotted that the search giant slapped a 2% surcharge on their ads from last month. If ever you wanted evidence that companies like Google have got too big for their boots, this is it. The charge is the result of the UK government’s Digital Services Tax levied on large online businesses, but instead of accepting the tax, Google has simply decided that its customers should pay it for them.

The government announced the tax well over a year ago, saying that it will apply to businesses that “provide a social media platform, search engine or an online marketplace to UK users. These businesses will be liable to Digital Services Tax when the group’s worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users.” It’s clearly targeted at the large online companies which are often accused of avoiding their tax responsibilities, but these companies are now demonstrating exactly why they need to be brought down to earth. Amazon, for example, began passing on the extra 2% to its third party sellers at the start of September 2020.

The Digital Services Tax was always designed as a stop gap by the UK government and has many defects, not least that it is apparently not going to collect much tax, while being objectionable to the US government. Passing on costs like this to customers is also nothing new. It seems that well optimised campaigns are going to be more important than ever in 2021.