The new UK Digital Services Tax (DST) came into effect April 1st, 2020 – at a rate of 2%.
What is the UK Digital Tax?
From 1 April 2020, the UK government introduced a new 2% tax on the revenues of search engines, social media services and online marketplaces which derive value from UK users.
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Who is likely to be affected?
The HMRC are going to be monitoring this, so corporations who don’t comply will be dealt with. Most likely through a fine.
This means that several big brand corporations are going to be affected – those include and are not limited to;
Google pass 2% tax cost onto Ads customers
Google are a large multi-national enterprise and they fall under this new category – a significant proportion of Google’s revenue is derived from the provision of a search engine. This is of course through Google Ads.
However Google only paid £44.3m in corporation tax to the UK. That is the ‘equivalent’ of 2.73% of its revenue in corporation tax, before losses and offsets were taken into account on the balance sheet. As of April 1st 2020, corporation tax in the UK is 18%.
Sources told Campaign that the 2% UK tax would apply to spend on the Google Ads network. But this would not apply to Google’s Display & Video 360 platform.
With the Google Ads platform pushing users to spend more money with new ‘smart bidding’ and ‘ads optimisation’ this has not come as a welcomed update.
Have you optimised your Google Ads post-lockdown? Andrew has some great tips to restart your Ads Campaigns.
Amazon pass 2% tax to marketplace sellers
Amazon announced that as of September 2020, the new 2% tax will apply to all Amazon marketplace sellers. Impacting direct-to-consumer retailers that use the platform.
As updated on Amazon’s Services website for Multi-Channel Fulfilment Fees;
Apple add 2% to 20% VAT for app developers
Apple have announced that they are adding the 2% tax increase to the 20% VAT tax they charge app developers on the Apple App Store.
In Q2 of 2019, Apple posted revenue of $58 billion. With $11.5 billion coming from services. Apple’s net sales in Europe were posted at $13.85 billion.
eBay announce they will absorb the 2% tax
eBay announced back in August, that they wouldn’t be passing the new 2% onto sellers using their platform. Instead they would absorb to cost.
This will be a welcome relief for eBay marketplace clients, as 2018 there are more than 25 million sellers on the platform.
At the time of this article, eBay are the only company to absorb the new tax, no other company has said they are going to do this.
Facebook ‘assessing’ changes
Facebook have not come out to say that they will pass the new tax onto customers of their advertising platform, Facebook Business, but they are yet to rule it out.
Microsoft yet to announce changes
Microsoft are yet to announce any changes, but this will affect customers of their advertising platform, Microsoft Advertising (formerly known as Bing Ads).
We are expecting an announcement soon.
What do you think about these new changes?
Share you thoughts in the comments section below.
On a poll I conducted on LinkedIn, 78% thought this was unfair. (9 votes).