IAB Europe urges Greece to scrap internet Tax

It is expected that the bill will be adopted on Thursday next week and will tax online advertising with a 21.5 % levy. The tax will be payable for online ads on news portals that have their legal seat in Greece and produce their own news (but not e.g. other portals or forums). There are serious doubts, whether such a tax, payable to a third party, the journalists’ pension fund, is lawful. In any event, such plans would impose a serious competitive disadvantage to Greek news portals.

The proposal disregards the nature of the Internet, since online advertising markets are far less distinct and advertising clients can reach the same user on different platforms or sites. If that can be achieved at lower costs via non-news portals (or by news portals not based in Greece), advertisers will choose that option to the detriment of the Greek news publishing industry. News portals which invest in the production of owned content  will not only lose advertising revenue share but, as this is their most important -if not unique- source of income, their very existence may be threatened.

However, the consequences are clear: Europe’s Digital Agenda would suffer a blow in Greece, as the production of high quality content is likely to decrease, leaving millions of users with significantly less choice. Moreover, quality content and the development of the digital economy tend to be intertwined so, through this tax, Greece risks damaging a key growth lever for its overall economy. This ought to be a crucial consideration particularly in a recessionary environment.

“Any tax on the Internet risks negatively impacting its growth. The European Commission has identified the Internet as a growth medium, which contributes positively to the overall economy and helps to create jobs. Instead, the Greek Government should propose measures that would foster entrepreneurship in the Greek online sector and generate employment and additional tax revenues.” said Alain Heureux, President IAB Europe.

“The plan to tax advertising is understandably very appealing to the Greek Government, which fights to rescue the country’s finances. However, it may prove a short-sighted measure that will do lasting damage to its Internet economy, an eventuality that will more than offset any immediate gains. Any tax on the internet -particularly the specific measures that introduce multiple market distortions- bears the risk of causing severe damage to the country’s digital future. We will consult with the European Commission and assess further actions.” said Kimon Zorbas, Vice President, IAB Europe.

Background

The Greek Government introduces in an article of the pension scheme law a tax for online advertising of 21.5%. The tax is payable only by companies with a legal seat in Greece and only if they publish news they created themselves. It disadvantages Greek news portals and to other Greek web sites. The revenue of this tax goes to a third party, the journalists pension fund. Such taxes for third parties have been under scrutiny by the European Commission and were in many cases abolished.

The Greek online market share was less than 5% in 2009. While Greece is one of the less mature markets, it WAS on track, catching up with a 40+% growth rate in 2009 (http://www.iabeurope.eu/news/europe's-online-ad-market-continues-to-grow-despite-the-recession.aspx).According to the Eurobarometer (E-Communications Household Survey, Publication June 2008), Greece has one of the lowest Internet penetration rates and ranks 26th in the EU 27 with only 22 % of households having Internet access (compared to a 49 % average in EU 27) and only 14 % of all households that have access to broadband. The broadband Internet access (compared to an EU average of 36 %).

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