back to article Google, Amazon pass on UK Digital Services Tax by hiking ad prices, fees at same rate the government takes

Google and Amazon will increase the prices they charge advertisers and sellers to reflect new digital services taxes being levied in the UK, Austria and Turkey. A letter sent to advertisers by Google overnight and sighted by The Register opens: “On November 1, 2020, Google will begin charging new fees for ads served in the …

  1. fnusnu

    No surprise here

    All taxes are paid from the wallet of the customer.

    1. teknopaul Silver badge

      Re: No surprise here

      When you have a monopoly and thus totally inelastic demand. In a free market economy its added to the supply curve as a cost.

      1. rodlee

        Re: No surprise here

        Er.. no. Demand and supply curve are two separate functions. It's their intersection that determines price and quantity exchanged.. Advertisers choose to buy more or less according to their perceived marginal revenue, at least they would if they knew what they were doing.

    2. hnwombat
      Facepalm

      Re: No surprise here

      "All taxes are paid from the wallet of the customer."

      That's a fallacy. It's a cycle; pinning the exact source is very, very difficult. Remember that the customer gets their money from their employer-- and if prices for the customer go up, they demand more from their employer. "All taxes are paid by the producer" has exactly equal validity, logic, and provability as your statement.

  2. chivo243 Silver badge
    Devil

    The Customer is King

    He can afford it!

  3. DavCrav Silver badge

    This is proof, if any more is needed, that Google is a monopolist and needs to be broken up. Being able to hike your fees because your company's tax is increased (rather than an indutsry-wide levy) is good evidence that you are a monopolist.

    1. I ain't Spartacus Gold badge

      It certainly is. We're still outsourcing competition regulation to the EU until December - so it'll be interesting to see what the new competition regime makes of this. It's pretty blatant.

      I'm still convinced it's Google's arrogance that will bring them down. They've had so many opportunities to deal reasonably with politicians - and every time they double down on trying to achieve exactly the opposite result of what regulators are going for - and hope their massive lobbying and academic astroturfing budget will get them out of trouble. When that day comes, I'll be over here, pointing and laughing.

      1. sabroni Silver badge

        re: so it'll be interesting to see what the new competition regime makes of this

        Will it? You think we'll "Level Up™" enough to be able to take on Google?

        1. veti Silver badge

          Re: re: so it'll be interesting to see what the new competition regime makes of this

          Someone will. Remember 20 years ago, it was Microsoft that looked untouchable? Now they're not even mentioned in these discussions.

          The wheel of time turns quickly for companies.

          1. Flocke Kroes Silver badge

            Re: 20 years ago

            The EU got us the option to chose which browser we wanted to use (but the price of Internet Explorer was still included in the price of Windows) and the option to chose which media player we wanted to use (but the price of Microsoft's media player was still included in the price of Windows). Getting that far took about a decade, with Microsoft eventually paying ever increasing fines until the fines exceeded the benefits of breaking the law - because Netscape had already starved to death.

            The world is a better place when competition laws are enforced - even five years too late but the real change that will one day push Google into second or third place will be unrelated to the activities of politicians just like it was when Microsoft failed to extend their desktop operating system near monopoly into mobile phones.

            1. don't you hate it when you lose your account Silver badge

              Re: 20 years ago

              I was paying for Windows media player!!!! That's like paying for toe fungus.

              1. David Austin

                Re: 20 years ago

                Really? MS Used to charge for WMP? I just always assumed it was baked in.

                1. I like fruits
                  Boffin

                  Re: 20 years ago

                  I think that was the point - you do not pay for Windows less if you choose don't use their player nor browser.

            2. AMBxx Silver badge

              Re: 20 years ago

              It was being a near monopoly that did for MS rather than any competition law. IE4 was great for its time, but development ground to a halt as they had 90%+ market share. That left a gap for Firefox followed by Chrome.

              Now we're back in the same situation. It's time for multiple advertising platforms that are independent of the large corps. No idea how that's going to happen though.

              1. Anonymous Coward
                Anonymous Coward

                Re: 20 years ago

                How about they create some special place, let's call it a special website, a unique website, where they can publish all the ads they want and people looking for ads would go to said website and click on ads all day long?

                Heck, have all websites have a mandatory link (plain HTML, mind you, no Java tricks :D) to said site, clearly marked Advertising, and watch the net be free again.

                1. Roland6 Silver badge

                  Re: 20 years ago

                  >Heck, have all websites have a mandatory link (plain HTML, ...) to said site, clearly marked Advertising, and watch the net be free again.

                  Like having a domain name of the form: xyz.advertising (or xyz.advertising.uk) ?

                  I'm sure Nominet would happily provide and administer such a domain ...

          2. Anonymous Coward
            Anonymous Coward

            Re: Remember 20 years ago, it was Microsoft that looked untouchable?

            the problem is, the big bullies are already very, very sensitive to trends and fads, and as they sit on a stinking pile of cash, they can, and DO scoop any and every little and not so little company that comes up with a bright idea.

            1. AMBxx Silver badge

              Re: Remember 20 years ago, it was Microsoft that looked untouchable?

              And then they either screw it up or shut it down.

        2. I ain't Spartacus Gold badge

          Re: re: so it'll be interesting to see what the new competition regime makes of this

          UK monopolies law was reasonably tough before we handed it over to the EU - and I don't think any of the tough stuff the EU have done has been controversial here. So I'd expect us to have similar competition law. Particularly as lobbying is less effective in this country than it is in the US - because our national elections don't cost $5bn a time - the 2 main parties spend roughly £15-30m each.

          In fact I suspect the EU are going to move the other way, and significantly ease their monopolies enforcement - as there's much more of a feeling that they want to protect "european champions". Both the French and Germany government were dead pissed off that the Commission blocked the Alstom - Siemens merger a couple of years ago on competition grounds. They want big companies to compete with China and the US. Although fining Google is becoming something of a spectator sport for the Commission now, and that's politically popular - and gives good cover for our lot to join in and get some free cash. Google management's arrogance and stupidity make them an easy (and tempting) target - and their involvement in election manipulation and fake news makes them even more juicy and deserving of a bit of government kicking. They've also got few friends in the media.

          1. Korev Silver badge

            Re: re: so it'll be interesting to see what the new competition regime makes of this

            They've also got few friends in the media.

            It'd be quite easy for Google to trash a media outlet if it so chose; just lower it in search results, Google News etc. Look at the Facebook battle in Australia at the moment for an ongoing Big Tech Vs media battle..

            1. I ain't Spartacus Gold badge

              Re: re: so it'll be interesting to see what the new competition regime makes of this

              Korev,

              True. That's why Google have few friends in the media anymore. Organisations might be less likely to openly come out and attack Google, though that's not stopped Murdoch or Axel Springer having a bloody good go. But what they're also unlikely to do is come to Google's support if the government are about to give them a well-aimed regulatory kick to the bollocks.

              Not being popular with any politicians means they're also less likely to get opposition support against government regulation - and so their funding for "independent" academic and think tank research to say how great they are is likely to have almost no impact anymore. Plus crying wolf about GDPR and the right to be forgotten turning out to be utter bollocks.

          2. Hollerithevo Silver badge

            Re: re: so it'll be interesting to see what the new competition regime makes of this

            So you're suggesting that once the UK is going it alone in 2021, they will get tough on Google and its brethren? You don't think that it, too, will want "big companies to compete with China and the US"? Although fines on Google would bring in some ready cash, and it will look like BoJo and crew are championing the little man.

            1. I ain't Spartacus Gold badge

              Re: re: so it'll be interesting to see what the new competition regime makes of this

              Hollerithevo,

              But Google aren't one of our big companies - which is why they're unlikely to have many friends under any likely UK monopolies rules. If they're still being regularly fined by the EU Competition Commission (they're not a European Champion either), then it would be pretty easy for UK monopolies investigations to ride on those coat-tails.

              It's hard to know what UK competition law will end up being. We've not had government pushing "national champions" since the post-war consensus broke down in the 70s/80s when Thatcherism came in. New Labour didn't go back to it. Corbyn would have liked to go back to it, he's a Bennite, but it's yet to see what direction Starmer will take Labour. Johnson is probably more sympathetic to government market intervention than any top Conservative politician since Heseltine - and he may have some ambitions in this direction - but would struggle to get that past his own party. And money is rather tighter since Covid - so the government isn't going to be as free-spending as he probably hoped it could be, after winning the last election.

              The EU are looking at having more of an industrial strategy, possibly linked to defensive trade tools for dealing with China (and Trump if he wins). Though it's not certain Macron and Merkel have the political juice to push that through, particularly given Merkel is at the end of her career - and Macron seems to have a talent for making enemies as fast as he makes friends at the EU level.

              If Biden wins I'm sure he'll dial down the hyperactivity and randomness. But I think nationalism is here to stay in trade and competition policy for the next decade at least, and it will be hard for any British government to resist that totally - given what's going on in the rest of the world.

              1. John Sager

                Re: re: so it'll be interesting to see what the new competition regime makes of this

                How do you pick 'National Champions' though? Benn wasn't very good at it, and would you trust any of the current lot? All those govt support for industry things just became boondoggles for smart grifters. I give you DeLorean and Strathearn.

              2. First Light Bronze badge

                Re: re: so it'll be interesting to see what the new competition regime makes of this

                BoJo for government internvention?

                I doubt he has a policy position on anything that's not subject to the winds of change and the meandering of Trump's mind.

                1. I ain't Spartacus Gold badge

                  Re: re: so it'll be interesting to see what the new competition regime makes of this

                  I doubt he has a policy position on anything that's not subject to the winds of change and the meandering of Trump's mind.

                  First Light,

                  Then you've not been paying attention. You might not like the man, but he's been a pretty consistent middle-of-the-party Tory with a bee in his bonnet about the EU for his entire career.

                  It's fashionable to call all Brexiteers right wing, and assume that every pro-Brexit Conservative is like Rees-Mogg. But the issue of the EEC/EU has always cut across not only ideological lines, but also party ones - and it's foolish to think otherwise. The EU as a good thing has become such an item of received wisdom, going on for groupthink, amongst certain sections of society that they don't seem to be able to conceive of normal people not agreeing with them. Hence all Brexiteers are labelled as extremists.

                  Obviously Johnson doesn't help his cause, by being such a mouthy git. But the idea that he's in any way similar to Trump is laughable. As has been shown every time they've got involved in foreign policy disputes - where Boris has been pretty much in line with the European foreign policy mainstream - and lined up with them against Trump.

                  He's a mainstream socially liberal, economically centre right politician who happens to be anti-EU and lacks discipline.

              3. Potemkine! Silver badge

                Re: re: so it'll be interesting to see what the new competition regime makes of this

                which is why they're unlikely to have many friends under any likely UK monopolies rule

                Once UK will be totally separated from the EU, it may well end like an US dominion. When the US leaders will ask UK to do a favour by stopping harassing US companies, do you believe the UK will be able to say no?

                1. I ain't Spartacus Gold badge

                  Re: re: so it'll be interesting to see what the new competition regime makes of this

                  Very easily.

                  Also Google and Facebook are rapidly losing political support in the US. Tump might have threatened tariffs against France for having a bash at taxing Google, but that's more out of his bizarre obsessions and economic nationalism.

                  Also note that France backed down on their tax, and the UK are still going ahead with ours. Without having got into a trade battle with Trump. At least not yet.

                  The issue may disappear anyway, given the state of our trade negotiations with the EU. Given their absolute obsesson of not wanting to have much of our relatively more competitive services market involved - Google may be forced to repatriate UK advertising sales back here from Ireland and then pay their corporation tax to our government, rather than Ireland's. The difference there is that HMRC can do a much less politically controversial bit of work on stopping them cheating too much with transfer pricing.

    2. Robert Grant Silver badge

      Being able to hike your fees because your company's tax is increased (rather than an indutsry-wide levy) is good evidence that you are a monopolist

      What are you talking about? Tax goes up, costs go up. Occam's Razor isn't "The simplest explanation is usually the correct one, unless you have a random ideology you want some evidence for."

      1. veti Silver badge

        Besides, isn't this precisely what we wanted? If prices go up, online advertising loses some of its advantage over other media. Maybe there will be less of it. How is that anything but a win?

      2. I ain't Spartacus Gold badge

        What are you talking about? Tax goes up, costs go up.

        Robert Grant,

        Economic theory says that companies don't set either wages or prices. They charge / pay what the market will bear - and if their costs go up they just have to put up with it, as they're already charging all the money they can get away with. Of course, if everyone's costs go up, then everyone will put their prices up - and then the market price will rise.

        However monopolies do set the market price, as there's no alternative. Which is why you pay Apple and Google 30% for going in the app stores, with no negotiation on rates - even for the big boys. In economics you'd call online advertising an oligopoly, because Google and Facebook are the two big boys who control well over 50% of the market between them. In law they're probably both monopolists - defined as having over 30% of a market and market control (i.e. the ability to be able to set monopoly prices).

        It's basically a definition of a monopoly that you get to set the market price, as opposed to the customers doing it. And hence, make monopoly profits. Obviously none of this is really as black-and-white as I put it down here, but that's the first bit of any monopoly investigation: Do you have one? Do you set market prices?

        For interest a monopsony is when someone controls the market for buying stuff, rather than selling it. So when Apple, Google and a bunch of other Silicon valley companies got together to not poach staff off each other and artificially lower wages, that was a monopsony - although I don't remember what the word was for a group of companies acting as one (in the same relationship as monopoly and oligopoly. Cartel perhaps? To be fair, I last studied economics in the mid-90s, so we're talking the last millennium!

        1. Dinanziame Bronze badge
          Alert

          However monopolies do set the market price, as there's no alternative.

          In the case of Amazon, maybe; but not for Google. Amazon sets prices for whatever it sells, but ads sold by Google don't have a fixed price list; they're auctioned off, and so they are sold at what the customers are willing to pay. (Google also sells cloud services at fixed prices, but it's not much compared to Ads). If every company buying ads in UK keeps having exactly the same budget, it should change very little to which and how many ads are shown, since they're all competing at comparatively the same price.

          1. I ain't Spartacus Gold badge

            Google auction off their adwords, but in an auction entirely controlled by them. And they're not too careful about checking for fake clickthroughs either - as it's also a process audited by them...

    3. Arthur the cat Silver badge

      This is proof, if any more is needed, that Google is a monopolist and needs to be broken up. Being able to hike your fees because your company's tax is increased (rather than an indutsry-wide levy) is good evidence that you are a monopolist.

      No. Any company can hike their fees any time they like, by any amount they like, for any reason or none. It's when a company hikes its fees and doesn't lose business that one starts thinking monopoly. Take a look at Google's next few quarter's advertising revenue in the UK (if they publish details) to see what happens.

  4. cb7 Bronze badge

    Only 2%?

    Why only 2%?

    Anyway, something's fishy. I don't get how the average pay packet for nearly 4,500 staff supporting UK operations can be £234,000.

    Allowing Google to pay only 2.73% tax on £1.6Bn revenue.

    Source: https://www.accountancydaily.co/google-revenue-hits-ps16bn-pays-only-ps44m-corporation-tax

    1. I ain't Spartacus Gold badge
      FAIL

      The article you quote starts with a lie. That's the only way I can describe it, because it's supposed to be an accounting publication and should therefore fucking know! Corporation tax is not levied on revenue it's levied on earnings.

      So describing their corp tax bill as any percentage of revenue is utterly meaningless! These people shoudl be aware of something as basic as this - and therefore are being deliberately dishonest in order to stoke outrage. Which, in your case, has succeeded.

      Corporation tax is levied on profits (earnings), not revenue (turnover / sales). Their profits are down on last year, hence their corporation tax is down.

      To quote the actual relevant figures from your article:

      Operating profit was put at £225.8m, down from £245.5m the year before.

      So they paid £44.3m corp tax on profits of £225.8 - which is 19.6%.

      Now, admittedly, Google almost certainly were guilty of tax evasion back when they sold their advertising in the UK, but processed all the paperwork in Ireland - and claimed that was where they paid their tax. Which is why they moved their sales organisation over there a few years ago, after some sort of telling off from HMRC - I don't remember the details, if they were even public.

      But this doesn't appear to be it.

      1. Anonymous Coward
        Anonymous Coward

        When ever somebody says something like "Company X only paid £Y tax on £Z **revenue**" I immediately switch off and blank the rest of what they say because, as already pointed out, they obviously know fuck-all about how business taxation currently works.

        Whether business taxation currently works *well* is another story, of course.

      2. katrinab Silver badge
        Flame

        Sure but their net profit margin worldwide is 23%. Are we supposed to believe that in the UK, which accounts for 10% of their worldwide revenues, their profit margin is only 2.7%?

        1. I ain't Spartacus Gold badge

          katrinab,

          They don't sell ads in the UK. They sell those ads via Ireland. And pay their corporation tax there.

          Things may change when we're out of the European Single Market, or may not, but that's the current position. I believe they have quite a lot of R&D and coding types in the UK, I don't know if they also host back-office type stuff here as well, or how much in the way of datacentres they have.

          But what they were doing was to use the Single Market as designed. That you could sell into any country in the EU from any other. Admittedly they're a large company, and so had this structure to avoid tax. We shall see what happens in future.

          1. neilfs

            So to compound their tax going to another country they're claiming back R&D tax here against what little tax they do pay here. Smart people, dumb regulators for creating such a weak rule set.

        2. DS999
          WTF?

          In what world does Google derive 10% of their worldwide revenue from a country as small as the UK? Any numbers claiming to show that are highly suspect.

      3. cb7 Bronze badge

        Yes, but you didn't address the point I was making, which is the operating profit is so low because staff costs seem to be artificially high. Does an average salary of £250,000 (round numbers) really sound realistic to you for 4,000 staff (again round numbers)

        1. I ain't Spartacus Gold badge

          cb7,

          I did address the point you were making, which is that turnover is irrelevant to corporation tax.

          Their operations in the UK are odd, becaue they've hived off most the of the revenue to Ireland, where they do their advertising sales, in order to benefit from lower corporation tax. Which is perfectly legal in the EU Single Market.

          I ignored your point about salary, because it wasn't relevant to you the complaint you erroneously made in your first sentence.

          However, going back to those odd UK operations, the salary might make sense if you think of them as having sent the low paid jobs off to Ireland - and they probably contract out the cleaning and such. Whcih could just leave senior managers and the type of well-paid researchers who are on very fat salaries with share options. I don't know how much their UK operation is their European HQ, but if that's the case - then the salary average will be brought up by all the senior managers. Particularly if people are relocated away from the US to the fleshpots of London - and would then be on top money. This is speculation mind, I don't know their corporate structure. But Google do pay well and used to hand out a lot of share options (so I'm guessing they still do), particularly to the R&D types and management. It only takes a few people on million pound salaries to bring that average down for everyone else. Plus London is an international legal hub (as well as finance, currency and insurance) all of which are notoriously highly paid at that kind of corporate level.

          1. katrinab Silver badge
            Boffin

            Sure, but if the advertising sales are made by staff in the UK, then the Irish company has a business activity in the UK, and must register as a foreign branch in the UK and pay UK tax on its profits. It would not have to pay tax on those profits in Ireland.

            Google is putting a lot of revenue through the UK accounts, around 10% of their worldwide total. That very likely includes UK advertising sales. They are also putting a lot of expenses in the accounts, way more than 10% of the worldwide total. So what they are doing is saying that the UK business has to purchase services provided by Google subsidiaries elsewhere in the world. I'm sure they are, but are they charging a fair price for this?

            Alternatively or additionally, Google UK is selling services to other Google subsidiaries around the world and charging for them. Are they charging a fair price for that?

            1. I ain't Spartacus Gold badge

              Katrina,

              No. Google are putting 1% of their global sales through the UK. £1.6bn is tiny, their global turnover was around £120bn last time I looked. They used to sell ads here, claim the paperwork was from Ireland, and dodge the UK tax. That stopped years ago, and the sales roles were moved to the Irish subsidiary. I’d guess their UK ad sales will be more than £10bn nowadays.

      4. the spectacularly refined chap

        The article you quote starts with a lie. That's the only way I can describe it, because it's supposed to be an accounting publication and should therefore fucking know! Corporation tax is not levied on revenue it's levied on earnings.

        Of course it isn't. Forget the hyperbole, if you want that kind of analysis you may as well argue they report that 2+2=4. Accountants know what the corporation tax rate is, they even know how it is calculated, they don't need a headline, or you, to explain it. The focus of that article is to compare the revenues and tax and ask if they are typical. If not, why not? You missed that because you skipped over the big words you didn't understand.

        In other headlines:

        3+3=6

        8/2=4

        10-9=1

        1. I ain't Spartacus Gold badge

          Spectacularly refined chap,

          There is no common relationship between turnover and corporation tax. The two figures are almost totally unrelated. Corp tax is levied on profit. Profit is not really related to turnover.

          So the article is actually saying that 2+2=an elephant. Hence it’s either ignorant bollocks or deliberately deceptive.

          1. the spectacularly refined chap

            They are not directly related but saying they paid X tax on Y taxable profit as is being called for is a simple sum: accountants do not need that explaining to them. The article instead goes a step deeper bearing that specialist audience in mind: is the claimed profit to revenue ratio what you would expect? Does it strike the educated, experienced reader as reasonable?

            You can't argue on the one hand that accountants know how to calculate corporation tax and then go on to say they need an entire article presenting the results of a single such calculation.

            1. I ain't Spartacus Gold badge

              A simple sum that they didn't bother to actually do in the article though. Instead of the misleading sum they did bother to do - a sum on two perameters that are actually unrelated to each other.

              They didn't then go on to talk about what this told us about Google's profit margin, which is the only thing it even vaguely points towards. And even there the relationship is inexact as, for example, in the case of Amazon where they spent their first 15 years re-investing pretty much all of the profits into growing the business. Thus they didn't owe any corporation tax, and neither were they "guilty" of even tax avoidance (let alone the illegal evasion) - because they weren't making profits on which corporation tax is actually due.

              Google's UK business is not really aimed at making big profits, the big profits in the UK are made on advertising sales - which are done through their sales department in Ireland.

              Anyway the article was deliberately misleading. It didn't discuss any of the points I've made, nor even the points about assessing why their margin was so low that you claim it made - it was clearly done to stoke fake outrage about how low the percentage was. And therefore it's misleading bollocks and should be ignored, as I originally said.

    2. GioCiampa

      "Allowing Google to pay only 2.73% tax on £1.6Bn revenue."

      That's how we get taxed (in good old PAYE-land) - the idealist in me would like corporations to be taxed that way too... but their pockets are deep so we get shafted, and they get their accountants to reduce their "profits" by as much as they can...

      1. Def Silver badge

        A progressive tax on revenue should be levied in an ideal world. But the bottom rate shouldn't start at the first <currency_unit> earned.

        Without thinking too much about it, a 0.1% rate on revenue over 500 million would be a good starting point, rising to 10% on revenues over 10 billion. That would hit the largest companies the most while leaving small to medium businesses largely unaffected.

        A severe restriction on the amount of money that can be transferred to a sister company for "licensing" wouldn't be a bad thing either. (Either that or make that taxable somehow.)

        Good luck ever getting any of that passed into law though.

        1. I ain't Spartacus Gold badge

          Def,

          A tax on revenue is a really, really bad idea. Disastrous if you do it in just one country going to just bad if done globally.

          Sure it makes no difference to high profit margin IT companies - although enforcing corporation tax properly is the better solution. But it also really punishes manufacturers of stuff, and also retailers, who make much lower margins. A 2% turnover tax on Google is probably less than their corporation tax rate, a 2% turnover tax rate on say a brick manufacturer would probably bankrupt them.

          That's why we tax profits. And why it's fair to do so. Which is presumably what you meant by "progressive"? Some businesses are much more labour/resource intensive, and have much more competition - and so margins are very low - but because they manufacture in volume they can afford to make a small profit on a lot of transactions. But as soon as you start taxing them on turnover, you destroy the business.

          1. Def Silver badge

            A progressive tax is one where the tax rate increases as the taxable amount increases. So what I was suggesting was zero tax on any revenue under half a billion <currency_unit>s and progressively more on revenue over that value up to some maximum revenue value at a top tax rate.

            And I think it's fair to say that just taxing profit clearly isn't working after a certain point. There are too many loopholes and ways to avoid it. Which is what started this conversation in the first place.

            1. I ain't Spartacus Gold badge

              Def,

              Oh, thanks for clarifying. Normally progressive as a description of a tax means that it hits those who've got more money harder.

              Clearly you think this describes a turnover tax, but it really doesn't. Because not all the companies with large turnover actually have much cash.

              I work in the building services industry. The gross margin that most building/mechanica contractors make is probably less than 1%. Unless there are special conditions on the job, they often bid at cost price, and the only margin they can make is on going in assuming full purchase price on the materials they need - and then making a profit by driving those costs down. That's their margin, and it can sometimes be incredibly narrow. The effect of a 1% turnover tax on those kind of companies would be to take almost all of their meagre profits. Do the same to Google, and you're only taking loose change.

              Yet there are specialist contractors in say fire safety or Legionnella control who can almost name their prices.

              Similarly we represent several manufacturers. One that sells a commodity product, where if they can make 10% gross margin on a sale they've been lucky. And they're a niche player who are kinown for good service and being slightly expensive - so never get big contracts. And yet another make niche products that they've designed themselves to do specialist jobs where 60% gross margin is easy to achieve - although that's a bit misleading because the £10-£50,000 it costs to get regulatory approval for each product is counted as a central cost so any unit we only sell a couple of a year may actually make a loss - and so represents a big risk.

              And that's why we tax profits.

              It's hard and subject to abuse. But taxing turnover destroys low margin companies like shops and manufacturers - while being very cheap for more specialist companies or high margin ones. Any reasonably set turnover tax would undertax the richest and overtax the poorest - which is the exact opposite of progressive taxation.

            2. DS999

              That's a terrible idea

              So then Google breaks up its UK operations into smaller ones, by county perhaps, so that they can fall under the revenue threshold and pay nothing. They could even sell stock in those companies so the parent corp wouldn't own 100% of it and arguments couldn't be made to consider them collectively for tax purposes.

              Anytime you come up with a new scheme to tax companies that you think is "fair", you have to give at least a few seconds thought to how easily they can get around it. If you can find a system that's both fair and there isn't a way to get around, you will have discovered something that's eluded mankind since taxation was first created by some ancient king.

            3. SundogUK Silver badge

              Google and the other giant tech companies are exceptional cases. If you base your tax law on exceptional cases you are going to bork your economy.

        2. katrinab Silver badge
          Happy

          Your second proposal has already been done

          https://www.gov.uk/government/publications/income-tax-royalty-withholding-tax/income-tax-royalty-withholding-tax

      2. I ain't Spartacus Gold badge

        We don't really get taxed on turnover in PAYE-land though. Unless you're paying for your office, computers, chairs, plant and machinery out of your pay packet...

        Also we come to tax incidence theory here. Companies do not pay tax. Corporation tax is paid by a combination of the shareholders the workers and finally the customers, in roughly that order. Sharholders already pay capital gains tax on share price rises and income tax on their dividends. I think the neatest way to solve this would be to abolish corporation tax and have all the taxes on the shareholders - but that doesn't work in a single country very well.

  5. Anonymous Coward
    Anonymous Coward

    Oh no! Now my £3 plastic crap from Amazon will cost £3.06! Still £5 cheaper than the little place down the road that has to pay things like rent, business rates and sick pay to employees.

    1. Anonymous Coward
      Anonymous Coward

      so how much do you care?

      The fiver you can afford, do you like having local businesses or have you never needed something more urgently than 24 hour delivery?

      The system is capitalist. The people spending money have the power to change the direction the system takes. If they can be arsed.

      1. Hollerithevo Silver badge

        Re: so how much do you care?

        Which is why I go down the road to buy from my local vendor. I am willing to pay more. Or rather, I am not willing to pay the price Amazon actually levies on human beings and business in general.

    2. skwdenyer

      If Business Rates were a fixed amount per square foot across the UK, for all types of property, that would level the playing field somewhat. If you consider how much trade Amazon, say, can generate per square foot you'd rightly question why they pay so much less than the small shop down the road...

  6. Anonymous Coward
    Anonymous Coward

    > And you’ll probably end up paying, too, because advertisers build the cost of ads into the prices they charge for their goods and services. Now that the cost to advertise beer, bread, bacon and any other commodity on Google just rose, brands will surely pass on their extra costs rather than wear the pain on their own bottom line. Just as Google has chosen to do.

    Well no, not really. "Brands" don't spend whatever it takes to place n thousand ads on Google. They have an advertising budget measured in dollars(/etc.), which they try to spend wherever seems to get them the best return. But since this affects all customers equally within a region, and AIUI ads are priced by auction, the fee will likely be absorbed into the earlier price, and I can see the advertising effectiveness per currency-unit not changing much in real terms.

  7. Anonymous Coward
    Anonymous Coward

    People are forgetting, what big tech, especially Google, profits are engineered by design before tax is due on their revenue, "legitimately". The additional 2% tax acknowledges this and is supposed to place a fairer tax on these vastly wealthy companies, instead, ones like mine have the bear the 2% increase in a competitive market which is unfair and sometimes not possible to pass to the customer, an actual kick in the teeth. Ok Google!

  8. codejunky Silver badge

    Good

    What did people expect? It is amazing how it is somehow expected that its ok to dip fingers in someone elses pocket but I am sure there would be a different reaction to having the fingers in your pocket, as this shows. People are happy to try and take from google and amazon but cry when that cost is passed to them.

    Robin Hood doesnt work. The rich move their money a different way and pay for protection. Robin Hood cant rob the rich so he is left with the rest to steal from.

    1. Pascal Monett Silver badge

      Re: Good

      I don't get it ; what exactly are we taking from Google and Amazon ?

      In one case, we're being tracked, in the other, we pay for what we order.

      I don't see that we're taking anything from them.

      1. codejunky Silver badge

        Re: Good

        @Pascal Monett

        "I don't get it ; what exactly are we taking from Google and Amazon ?"

        Nothing that is the point. Trying to tax them more (take from them) resulted in the taking coming from those of us who use them.

    2. Anonymous Coward
      Anonymous Coward

      Re: Robin Hood cant rob the rich so he is left with the rest

      ironically, Robin Google and his Merry Amazonians aren't forcing you to hand them your money, they already have you by your balls because of FREE!!! and CONVENIENT!!! But they're not forcing you to buy their stuff. Not yet.

      1. codejunky Silver badge

        Re: Robin Hood cant rob the rich so he is left with the rest

        @AC

        How horrible they make things free and convenient. Bastards????

        1. First Light Bronze badge

          Re: Robin Hood cant rob the rich so he is left with the rest

          Definitely. Because:

          1. It's not actually free. I don't want Amazon having so much information about me that stays on their servers forever AND is used to make them more money by predicting customer habits, taking over the world, etc.

          2. I also don't want their stupid drones flying over me as they deliver useless schlock to lazy customers. So whose convenience is really being served? Seems like theirs.

          1. tfewster Silver badge
            Facepalm

            Re: Robin Hood cant rob the rich so he is left with the rest

            ...predicting customer habits...

            No worries there for now - "You just bought a TV! Would you like to buy a TV?" - seems to be their "AI"

  9. poohbear

    Ad budgets will stay the same, they'll just get less ads, and websites that rely on ad income will lose.

  10. Anonymous Coward
    Anonymous Coward

    And you’ll probably end up paying, too

    the solution: buy more more MOOOORE!!!

  11. ComputerSays_noAbsolutelyNo

    Wise words from down under

    "The rich gettin' richer,

    the poor get the picture"

    https://www.youtube.com/watch?v=9QzH4KOf9Bs

  12. katrinab Silver badge
    Boffin

    No really

    "And you’ll probably end up paying, too, because advertisers build the cost of ads into the prices they charge for their goods and services."

    Advertising space is auctioned off to the highest bidder. If Hovis bid £1 for an ad slot, that means they think they will make at least an extra £1 in gross margin from sales generated by that ad. The imposition of this tax is not going to mean they will earn an extra 2p from the ad campaign, so they will set their bid at 98p.

  13. jrd

    "And you’ll probably end up paying, too, because advertisers build the cost of ads into the prices they charge for their goods and services."

    Rubbish. The prices they charge are based on market analysis to generate the highest revenue, market share and/or profit. Costs are irrelevant unless the company has a monopoly.

    1. SundogUK Silver badge

      "Costs are irrelevant unless the company has a monopoly."

      I take it you work in government, or perhaps an NGO? Companies that actually build stuff are absolutely obsessive about costs. If they weren't, they'd go bust.

  14. RyokuMas Silver badge
    Trollface

    Meme potential...

    But.. but... but... this is Google! "Don't be evil" Google! The one's who were supposed to save us from Microsoft!

    They were supposed to bring balance to the IT world, not destroy it!

    ... all we need is an appropriate animated GIF with Anakin's head replaced by the Google "G" logo ad we're in business here folks!

    1. I ain't Spartacus Gold badge
      Devil

      Re: Meme potential...

      "OK Google, what are the headlines today?"

      Me suh Jar Jar Google. How may me help you-self today? Headlines are that Google be sad because nasty government take away their money - but hooray! Google suh puts up they prices to allll the advertisers - and so all problem go away and everybody be happy!

  15. msobkow

    No matter WHAT the expense, businesses ALWAYS pass it on to consumers. Every tax increase or fee the government ever imposes ends up paid for by the CONSUMER, not the corporations. :(

  16. Anonymous Coward
    Anonymous Coward

    Well Duh!

    don't use Google especially search. If you are at all concerned about your data security then this is a no brainer anyway.

    don't buy anything from Amazon.

    I've been Amazon free for over a year now.

    1. First Light Bronze badge

      Re: Well Duh!

      You must live next door to a large shopping mall. With a Waitrose.

  17. mark l 2 Silver badge

    Although this 2% digital service tax means that HMRC now gets more money, a large percentage of that money is coming from smaller businesses who have had their fees increased by 2% by Amazon and Google. As this tax is only supposed to be applied to business that have a turnover over £25m per year.

    An increase in 2% is hardly anything for billion dollar companies like Amazon but if you are a small business selling on the Amazon market place, who are already having to compete again Amazon selling the same or similar products, it might be a big hit to your profits.

  18. LeahroyNake Silver badge

    Beer, Bread and Bacon

    Don't think I have ever clicked an advert to buy any of those but sounds like a nice afternoon snack lol

  19. sketharaman

    Move on nothing to see.

    Taxes are always passed on to customers. Nothing to see move on.

  20. rodlee

    They're bluffing!

    In the long run if digital advertising costs more, alternative channels become more attractive, and/or knowledgeable advertisers will do less of it , provided of course that they know what their marginal return on advertising spend is.

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