What does the new Digital Sales Tax mean for advertisers?

4 min read

With the introduction of new digital advertising-at-the-point-of-sale taxes, the idea was to ramp up the tax take from the likes of Amazon and Google. In theory, a great idea. But, in a move that will surprise no-one, all this has done is given these companies an opportunity to pass the cost down to the end-user. In other words, you. 

Just when you think your budget simply cannot be stretched any further, and 2020 can’t really get much tougher, Google has different ideas. 

But this isn’t anything new. In July 2019 when France brought in a new 3% levy, Amazon increased their tariffs for small businesses, getting the individual sellers to cover the increase. The UK introduced a 2% Digital Sales Tax in early 2020 and, surprise surprise, they dodged that bullet, too - setting the precedent and passing the extra cost directly to advertisers. 

So perhaps we shouldn’t be surprised when the move was mirrored by Google? 

Google has told UK advertisers that they intend to pass on the full 2% cost of the new UK Digital Sales Tax from 1 November 2020. By doing so, advertisers may accrue an outstanding balance on manual and prepaid accounts once the budget has been spent, leaving you with an open balance that will then be taken from your next payment, and fewer impressions of your advert for the same spend. Stretching your budget to account for this will be, for many, a kick when you’re already down. 

Google also intends to add 5% additional charges to paid media budgets in Austria and Turkey, from the same date. 

We hear you; shouldn’t 2020 be the year where these huge platforms, many of whom have profited hugely by the conditions imposed on society as a result of the pandemic, choose to support advertisers when they need it most? 

 For performance-based marketers in the UK, Austria and Turkey this decision from Google will immediately tip the scales of performance value for money. But here, this is where we’re proud of what we do at Akero. Working from a performance-guaranteed model, we’ll continue to do all that we can for the sector to ensure this same performance-first approach still makes an impact.

Regardless, Google is still a critical advertising player for student specialist marketers due to the huge search volumes and the effectiveness of campaigns on the platform. It’s likely that many will have to swallow the cost of the new tax levy, despite knocks against ROI, and Google knows it. But, as an independent, media-neutral performance advertising agency, aware of these constant landscape changes, we’ll continue making recommendations right by you, and there’s power in diversifying. With the likes of Bing and Quora creating some really exciting shockwaves in the industry, and already producing fantastic results, this might be the opportunity for you to explore something new.

And talking of good news? Recently we announced that, through close consultation with HMRC, digital advertising through Akero is confirmed as zero-rated for VAT. So that’s one positive thing in the realms of budgeting. 

Other big players in the market have yet to make decisions on what they’ll do with the levy (Microsoft Ads), while others have absorbed the cost themselves, without saying much else (Facebook) - which we’ll still take as a win. And there are still conversations ongoing at Google HQ, and the response to the Digital Sales Tax is evolving, so we could be seeing developments over the next few months. 

If you would like to discuss the implications of these changes or want to discuss more how our performance-guarantees can help you mitigate the impact of these changes, get in touch