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Google advertisers will pay an extra fee for ads in France And Spain

4 mins read
March 2, 2021

Google told advertisers they would pay a fee for ads served in France or Spain. The move is in reaction to regulations taxing big tech companies’ revenue.

Google
© Solen Feyissa

On March 2nd, Google sent an email to Google Ads users stipulating they would see a 2% fee on their invoices starting May 1st, 2021. It applies to the ads that are served to French and Spanish IP addresses bought via Google Ads.

The company calls it a “Regulatory Operating Cost” and justifies it with the Digital Services Tax laws applied in France and Spain.

The taxes, also called the Google Tax in Spain and the GAFA tax in France, collect 3% of the turnovers made by large tech companies on French and Spanish users. It would charge revenue made by targeted digital advertising, advertising data sales, or platforms solely acting as digital intermediaries in the sales of products or services.

Google announcement

The legislation was passed in order to compensate the taxes that organizations such as Google, Apple, Facebook or Amazon avoid paying. More traditional companies pay 14 percentage points more tax than the GAFAs in the E.U.

The two countries adopted the laws in 2019 after the project of an international tax framework discussed by OECD members reached an impasse. The European Union had already discussed such a move but Sweden, Finland, Denmark and Ireland rejected the project.

As such, France decided to move forward with its own national regulation. The Spanish government followed shortly after. Germany backed down after concerns of retaliations against its automobile industry.

In 2019, French authorities estimated it could yield 500 million euros in revenue per year.

Trade battle with the U.S.

Most of the organizations hit by the legislations are Americans. As a consequence, it sparked a trade battle with the U.S.

The U.S. administration decided on a 25% increase on custom taxes for $1.3 billion-worth of products, such as handbags or cosmetics, punching some of the most vivid French exporters. Tariffs on wines and spirits were also mentioned but were eventually withdrawn. The U.S. had already increased EU tariffs with the Airbus-Boeing dispute. It also proved to be harmful to American wine and spirit retailers.

Due to the pandemic, both sides made a truce in early 2020 in order to find an agreement through the OECD.

In October 2020, the French Minister of Finance, Bruno Le Maire, declared such deal wasn’t found and that the state would collect the tax for the entire 2020.

On the U.S. side, the tariffs were due to come into force on January 6th, 2021. However, they announced the scheme was suspended indefinitely. The U.S. Trade Representative will instead evaluate a broader tariff framework.

The pause would in fact allow for further investigations on other Digital Tax Services applied in 10 more countries such as India, Italy, Britain or Italy.

Different fees applied according to the national regulations

Google and Amazon warned that such legislation would downstream affect their clients. The tech companies threatened to transfer the charge to the consumers.

Shortly after the French law was adopted, Amazon wanted to add the entirety of the tax at the customers’ expenses for any transaction made on Amazon.fr. Google announced in March 2021 that advertisers would pay for 23 of what the legislation collects for the use of their Google Ads service. It will be applied to all ads served in France and Spain, and can also be charged to advertisers transacting from other countries.

Similar fees were enforced by Google in November in the United Kingdom, Turkey or Austria for their Digital Tax Legislation. The rates are 5% for Austria and Turkey, and 2% for the U.K.

Google Ads enables buying some advertising formats that can be seen on Google Search results, which accounts for 61% of the total Google revenue, Youtube or other websites, including news websites. Against an intermediary fee, most publishers who sell ads on their platforms make their inventory available on the industry-leading marketplace: Google AdX.

Google and Facebook sometimes agree to pay

Since 2010, France has made several attempts to charge Google with taxes, whereas their European H.Q. is based in Ireland, with a more advantageous tax system.

Spain had also mandated Google to give publishers a part of their advertising revenue in 2014. The Californian company then decided to remove its Google News product from Spain.

Yet, in 2021, Google agreed to pay French and Australian publishers under copyright laws.

Google first threatened Australia to remove all its services from the country.

Microsoft stood up and said it was ready to offer an alternative. Microsoft sees an opportunity in government laws to reduce Google’s 91% market share on search engines. It would free up space for Bing, Microsoft’s own search engine.

Facebook first removed all news content from its platform in Australia for a few days before eventually agreeing to abide by the News Media and Digital Platforms Mandatory Bargaining Code. It will invest 1 billion dollars in support of Australian news organizations for the next three years.

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Clément Vérité

Clément is the executive editor and founder of Newsendip. He started in the media industry as a freelance reporter at 16 for a local French newspaper after school and has never left it. He later worked for seven years at The New York Times, notably as a data analyst. He holds a Master of Management in France and a Master of Arts in the United Kingdom in International Marketing & Communications Strategy. He has lived in France, the United Kingdom, and Italy.