Google is passing on the costs of a new digital services tax to British advertisers, thwarting the government’s plan to claw back some of the revenue generated by the Silicon Valley giant on British shores.
Advertisers will be charged an additional 2pc in fees from November 1 to cover the costs, the company told customers on Tuesday.
The digital services tax, which came into effect on April 1, charges 2pc on revenues generated in the UK from search engines, social media websites and online sales by internet companies like Google, Facebook and Amazon. It applies on revenues over £25m for companies with more than £500m in sales worldwide.
It is expected to make the UK £400m by 2021, and ultimately raise £500m per year, following years of frustration that foreign technology giants are able to book their profits from sales or advertising in the UK overseas.
Google said it will also charge advertisers in Austria an additional 5pc to cover the costs of its digital services tax, and in Turkey to cover legal fees.
“The Regulatory Operating Costs are being added due to significant increases in the complexity and cost of complying with regulations in Turkey. In Austria and the United Kingdom, the digital services tax (DST) fee is driven by the new digital services tax in these countries,” Google said.
The United States has criticised the levies, accusing the UK and other European countries who have implemented their own levies of unfairly targeting US companies. It threatened retaliatory tariffs on France for its planned digital tax, which led to it being delayed.
The US has pushed for a unilateral tax could be agreed among the countries to avoid technology companies being taxed individually and at different rates, but delays in negotiations have left several European nations to take matters into their own hands.
Amazon announced that from September 1 it would pass the cost of the digital services tax on to its sellers in the UK and elsewhere in Europe where it has been hit with additional taxes.