Google is set to raise its advertising costs for UK retailers by two per cent in a move that could see shoppers “ultimately pay the price”.
The online search giant is set to follow in Amazon’s footsteps and sidestep the newly instated Digital Services Tax, which was rolled out in the UK on April 1, by passing the levy directly on to advertisers.
Retailers hoping to advertise via Google Ads or YouTube will now be charged an extra two per cent in the UK from November 1.
Google has long been an essential source of online advertising for retailers, who often pay thousands of pounds a month for “pay per click” adverts.
This sees them pay a fee to Google every time someone clicks on their advert, a fee which will now be increased.
“Online sellers need to spend money on Google Ads to keep their products visible,” ParcelHero’s David Jinks said.
“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.”
Google said in response: “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.”
The Digital Services Tax was set up to ensure search engines, social media services and online marketplaces which derive value from UK users pay their fair share of taxes, adding a two per cent levy on all revenues made in the country.
Reports emerged last month that chancellor of the exchequer Rishi Sunak was preparing to drop the tax, which is expected to raise £500 million a year for the government.
The government has denied this report, stating that it’s been “clear it’s a temporary tax that will be removed once an appropriate global solution is in place – and we continue to work with our international partners to reach that goal.”
Primarily the tax threatens the UK’s trade relationship with the US, which has been made all the more important post-Brexit due to the state of the economy following the pandemic.