Imposing a tax on ad revenue collected by foreign tech companies such as Facebook and Google is urgent, the Minister of Culture and Business Affairs told RÚV yesterday. Ad payments to foreign companies totalled approximately ISK 369 million ($2.6 million / €2.4 million) in 2009 and have gradually increased to total nearly ISK 9.5 billion ($67 million / €62 million) in 2021.
Taxation still the plan, Minister of Culture and Trade says
Efforts have long been made to impose a tax on foreign tech giants such as Facebook and Google, which collect a large share of domestic ad revenue – but pay no taxes in Iceland. This creates something of a void in the operation of Icelandic media companies, as well as the state treasury, RÚV notes.
In September 2018, then Minister of Education Lilja Alfreðsdóttir, called a press conference to discuss plans to strengthen the Icelandic media environment by reducing RÚV’s activities in the advertising market and by imposing taxes on foreign tech companies.
“This is precisely why we’re proposing a uniform tax on national and foreign online media because a lot of this ad revenue is leaving the country. It’s not just us who are facing this challenge but our neighbouring countries, too,” Lilja observed just over four years ago.
RÚV echoed these statements to Lilja Alfreðsdóttir – who now serves as the Minister of Culture and Business Affairs – in an interview yesterday. The minister responded thusly:
“We decided to provide operational support to private media companies in Iceland, which was an important step. We’re currently reviewing the tax environment of media companies and taking into account developments abroad. But as I stated in 2018: the time is now, and we’re still working according to that plan.”
Foreign ad revenue rapidly increasing
As noted by RÚV, Statistics Iceland has compiled an overview of the distribution of advertising funds between domestic and foreign media. In 2013, the ad revenue of foreign media increased significantly at the expense of domestic companies. That trend has continued. In 2021, for example, when profits were expected to rebound following COVID, domestic ad revenue increased by 14%, while the ad revenue of foreign companies increased by 34%.
Statistics Iceland has also monitored ad payments to foreign companies, which in 2009 were approximately ISK 369 million ($2.6 million / €2.4 million) but increased to almost ISK 9.5 billion ($67 million / €62 million) in 2021. The institution honed in on ad payments made via credit cards, usually originating from smaller companies, or smaller ad campaigns, where foreign tech giants like Facebook and Google play a significant role. Their share of ad revenues has increased from 29% in 2009 when the total revenue was ISK 153 million ($1.1 million / €991,000); to 89% in 2011, when the total revenue was ISK 371 million ($2.6 million / €2.4 million). In 2021, their share of ad revenue was 95%, when total payments amounted to ISK 4.6 billion ($32 million / €30 million). The two companies paid no taxes in Iceland.
Uncertain whether legislation will be passed this year
Given the global nature of the issue, RÚV notes, the government has collaborated with other countries within the OECD on how to tax this revenue.
“I hope that we’ll find a solution because there are many domestic companies that rely on a fair competitive position against these international giants,” Finance Minister Bjarni Benediktsson told RÚV in 2021.
Lilja Alfreðsdóttir stated that resolving the issue was an urgent matter but was unwilling to promise that such legislation would be passed this year.
“It’s difficult to say. I hoped it would see the light of day in 2019, and then the year after. But then, of course, the attention of most governments shifted to the pandemic. But I feel like there’s a greater understanding of how urgent this is today.”