Advertisers set to pay levy on digital advertising in government tax bombshell
Australian brands look set to face a tax on digital advertising in a new policy emerging from the treasury this morning.
Briefings to both Fairfax Media and News Corp titles suggest that the Government plans to impose a “digital levy”. The SMH reports Treasurer Scott Morrison as saying that such a levy – targeting global digital giants is “inevitable”.
The arrangement is part of a deal to persuade crossbenchers to support the government’s tax law reforms.
The Australian reports the former the Nick Xenophon Team Senators, Stirling Griff and Rex Patrick have said a levy on international technology companies may get their support for the government’s proposed $35 bn company tax cut.
Senator Stirling Griff: “100 per cent behind a digital economy tax proposal”
Fairfax, in turn, reports Griff stated the party was “100 per cent behind a digital economy tax proposal”. The Labor Party has previously said it has no objection to such a levy.
According to the SMH report the levy “would look more like a sales tax through a GST-style levy paid on advertising. It would be up to the digital company to decide whether that levy was passed on to the advertiser”.
In March, the EU proposed a tax on digital technology companies with over 100,000 users in a country or over 7 million euros ($8.6 million) in annual revenues. While the actual rate has not been agreed, a rate of 3 percent would generate an extra $5 billion per year across the union.
Should a similar tax to the EU proposal be levied in Australia, such a tax may catch News Corp in its net given its global ownership and reliance upon digital advertising. It is also likely to catch many of the multinational programmatic advertising platforms. Mumbrella has invited News Corp to comment.
The Treasurer’s announcement also comes at the ACCC’s digital platforms review gears up. The inquiry itself was another concession to cross bench Senators in order to pass the government’s media reforms.
A digital platforms levy would almost certainly be effectively a tax on digital advertising given the dominance of Facebook and Google in the market. As such it would be the first advertising tax in Australian history.
Mumbrella has contacted the Treasurer’s office for more details. Fairfax reports Morrison will release a discussion paper on the policy options shortly.
topics
digital economy
Digital Platforms Inquiry
Digital Services Tax
Facebook
Federal Government
Google
tax
This item seems to imply that the proposed tax would only target ‘global digital giants.’
As a small independent niche publisher successfully tackling the likes of Fairfax and Murdoch, we would consider it most unfair if our online digital publishing business was to be taxed in such a way.
Jon Condon – publisher, Beef Central, Sheep Central, Grain Central
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Am I reading this correctly?
That the digital provider can pass the levy on – so the most likely scenario is that FB, Google etc. pay zero more tax, and the cost impost goes to the brand/advertiser which will most likely be passed on to the consumer?
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This is a the lamest idea yet to be seen as tough on the likes of Facebook etc with taxation.
Of course the levy will be passed onto advertisers, and with that the levy is then passed onto consumers through increased prices to cover that tax.
Are our politicians really that stupid to think this is viable.
It’s an easy fix – you play by the Australian Company Taxation rules or they get restricted access to the Australian market.
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Seems to be a big assumption being made that digital publishers and organisations that monetize digital inventory are swimming in profits… I completely agree with Jon, above. Now just watch this issue get mixed in with the digital supply chain issues and all of the sudden the point, if there ever was one, is lost.
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Guaranteed this will be passed on and will only impact the advertisers not the digital companies.
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This is a really crap idea.
Taxation of global digital giants such as Facebook and Google is one thing, but to create an ‘advertising tax’ will only serve to harm brands.
OF COURSE Facebook and Google will pass the cost on to brands, that is the best way for them to resist the tax and also
This is also going to impact companies like News Corp, which even though they are owned by a global organization, News Corp AU is entirely operated by Australian based staff, running Australian based websites, selling advertising to Australian brands. Advertising on News Corp AU is connected to it’s global parents mostly in name only, but they will be impacted by this tax all the same.
But then again, I have given up all hope of this Government of dinosaurs to do anything right these days.
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Either this article has not captured how it should work or the Federal Government has made a meal of the proposal.
I would hope that a GST style levy on digital media would act as an offset against company tax. So if you do all your billing out of Ireland or Singapore or The Netherlands then you can’t claim the levy back against tax paid.
So Australian publisher collects the 3% levy and pays it to the government but can claim back the amount paid rather than pass it onto their advertising clients.
International Company collects the 3% and pays it to the government but because they aren’t “operating” in Australia they can’t claim the amount back. So they have two choices; pass on the cost to their client or absorb it. If they pass it to their client the increased cost makes them less competitive.
If it is a just a flat 3% paid with no tax credit associated it is a money grab and will do nothing for the industry.
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To finish what I was saying:
OF COURSE Facebook and Google will pass the cost on to brands, that is the best way for them to resist the tax and also gives them a way of protesting the taxes.
On the surface Facebook and Google will accept the taxes, but beneath the surface they will past the cost of these taxes directly on to brands. Then they will tell brands that they needed to increase prices because of the tax. Brands will get angry at the government, and digital spend will decrease, which has a downstream impact on GDP.
If brands are not advertising digitally as much, then they could potentially lose retail dollars depending on the brand.
This tax is probably built in with the expectation that digital spend will decrease, but as long as the money is in the governments coffers instead of business and citizens, then it doesn’t care.
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You can be sure Murdoch will get an exemption somehow.
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This would hurt every single business in Australia that advertises on Google or Facebook – the costs would simply be passed on. It’ll hurt the publishers too as they rely on both to drive traffic – they’ll have to pay an extra 3-5% to achieve the same result. One of the worst ideas I’ve heard.
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There are ideas being floated and some politicians are showing intention – better than just endless talk. A digital tax passed on to advertisers (not sure that’s the case yet) is effectively the same as the taxes and hidden compliance burdens local media face already. The global digital platforms have so far evaded most things quite deftly and now some are squealing? Level it up. The digital ‘GDP’ impact is a total furphy.
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Politically easy to sell in (to the public) and actually a solid taxation concept. Consumption taxes are very simple to measure and collect (ie GST) and make the tax minimisation by Google, Facebook, et al much harder.
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That’s how I read it!
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