It is possible to be exceedingly stupid about taxation and here is our example of that:
Typical @Google @GoogleUK #googleads . Companies struggling & high unemployment because of COVID, recession incoming here in the UK. So what to Google do. They sneak in a 2% FEE on your INVOICE!! 😡 Bunch of absolute wankers. https://t.co/6erOWUyxni pic.twitter.com/NLH0GNNdID
— ˗ˏˋ Lee ˎˊ˗ 🤙🏼 (@YodasMyDad) September 1, 2020
The government has imposed a tax upon ad sales by Google. Therefore the tax appears upon ad sales by Google. It is the government collecting that money and therefore the government who should be castigated for raising those costs. Obviously.
For this is how taxation works. There are only us people around here. The dolphins and the dogs tend not to pay much tax. Therefore every tax leads to the wallet of some live human being getting lighter. Whose is determined by tax incidence.
Consumption taxes are paid by consumers:
Google is to pass the cost of the UK’s digital services tax on to advertisers, adding more than £120m to marketers’ costs annually, as the government’s attempt to get tech giants to pay more to the exchequer is billed to their customers.
Google has told its tens of thousands of clients that from November it will charge an additional fee for ads served on Google and YouTube. The move will increase advertisers’ costs in line with the amount the tech giant is set to pay in new digital services taxes as they come into force: 2% in the UK, and 5% in Austria and Turkey.
Quite so. A sales tax is, in the jargon, a consumption tax. Therefore it is consumers – the consumers of advertising being the people who buy it – who pay the digital sales tax. No one should ever have expected otherwise and we around here have been saying this for some time now.
The shock about this might not be quite as stupid as that Tweeted claim but still, it betrays a significant lack of knowledge about the world.
We can go a little further in our study of tax incidence. It is possible that use of Google advertising – just to use an example of something carrying that DST – will decline as a result of the 2% tax. People will move to smaller companies which don’t have to pay it say. If people buy fewer Google ads then some part of the effect of that tax falls upon Google shareholders in lower profits. Upon the wages of Google workers as fewer of them are hired. But note – if Google is that monstrous monopoly that people say it is then they’ll not move because there is nowhere to move to. Thus the tax will still be carried by consumers. It’s only if we’re in a competitive market that the tax impacts Google. But the justification for the tax is that Google is a monstrous monopoly. Therefore it is consumers that will pay it.
Seriously, people really ought to grasp this. The digital sales tax is a tax upon consumers, not tech companies. So, why is it being imposed?