The now Microsoft-owned professional social network LinkedIn is taking a bold step and planning to absorb the equalisation levy that has recently been imposed on internet tech companies in the country. The tech giant isn’t planning to burden the Indian companies advertising on its platform with the same, say sources close to the development.
Even though some of Internet’s biggest tech giants, including Google and Facebook are planning to pass on the newly introduced tax levies onto the companies using their platform for advertising, but Microsoft seems to be planning to shoulder that burden. A source close to the development reports that(via ET),
LinkedIn would deduct the tax from its own share of the pie, and not pass it to company that is paying for the advertisement.
If you’re unaware of the details of the equalisation levy(or infamously known as ‘Google Tax‘), then you should know it is a new tax reform introduced in this year’s Budget announcement. The government has introduced the same, in a bid to indirectly tax internet giants such as Google and Facebook on their advertising revenues from the country. The reform which came into effect just last month, introduced a 6 per cent equalisation levy on B2B online services, advertising and overseas online purchases that cost more than 1 lakh.
However, the government cannot directly tax foreign companies with no establishment in the country. Thus, the burden of the tax will fall on the shoulders of small firms and startups that rely on inexpensive digital marketing and advertisement methods on these platforms. And LinkedIn is opposed to the same.
Another source close to the development tells that the networking giant is currently trying to figure out a tax structure that is feasible and can be placed around the equalisation levy. And the source also adds that,
The issue currently is how LinkedIn can take credit of this (equalisation levy) in the US. As it stands today, this looks tough as there is no clarity as to whether the levy is a direct tax or an indirect, and whether it is cove red under bilateral treaties.
According to most international tax laws, MNCs have to pay taxes in the country that they are based out of or have a head office in. However, they are free to balance out taxes based out of one location at another.
In a fight to win over the Indian digital advertising market, this move by LinkedIn could also put pressure on aforementioned Internet giants Google and Facebook to absorb the equalisation levy rather than passing it onto startups and SMB’s.