Google Ads announced in a recent email and help article that they will pass on the cost of digital services tax or regulatory operating cost fees to advertisers. The taxes and fees will be charged on top of ad spend, and will be calculated as a percentage of the ad spend.
The digital services tax of 2% and 5% affects advertisers targeting the UK and Austria, respectively, while Google will charge advertisers targeting audiences in Turkey a 5% regulatory operating cost.
In the help article, Google details the fee policy:
For example, if you have a budget of €100 and accrue €5 in Austria DST Fees for ads served in Austria, you’ll be billed €105 (plus any taxes, such as VAT, that may apply in your country).From “Country-specific fees” Google Ads Help article
Individual advertisers who target these countries will need to take these fees into account when calculating budgets. Agencies and those managing multiple accounts may also need to notify affected customers, as well as update invoices and billing policies.
The fees will appear in the account’s monthly invoice as a separate line item per country. It is unclear whether VAT and other taxes that apply per country will also appear as a separate line item.
Advertisers should research current spend per affected country to build budget projections that include these fees. You can find your country-specific ad performance in the location report.
A taxing trend
Apple and Amazon have similar policies effective September 1, 2020, that pass taxes on to the smaller businesses that fuel their businesses. The fees that third-parties will pay range from the 2% DST for the UK to the 7.5% that app providers selling in Turkey pay on the App Store. Apple also stated that the fees will compound on top of VAT and other taxes, while App Store prices will not change.
The fees were originally intended to mitigate some of the revenue that large corporations like Apple, Amazon, and Google move out of countries like the UK. Critics have noted that by passing the tax on to sellers and advertisers, the laws end up hurting the economies of the countries they intend to help.