Start-ups paying 20-50% as Google tax

Google Tax…..Let’s first understand what is Google Tax, A Google tax, also known as a diverted profits tax, refers to anti-tax-avoidance provisions that have been introduced in several jurisdictions to stop companies from diverting profits or royalties to other jurisdictions that have lower or even zero tax rates.

Many start-ups in India, especially small and medium-sized ones, are feeling the pressure of Google's app store fees, often referred to as the "Google tax." These fees range from 15% to 30% of in-app purchases and subscriptions, and can eat into a significant portion of a start-up's revenue.

For example, internet giant Alphabet Inc.'s Google paid a negligible amount in taxes in the United Kingdom by completing its transactions in the low tax city of Dublin, Ireland, even though it earned $6.5 billion in revenue in the U.K.

While Google became notorious for its tax avoidance policies, other major companies, such as Amazon, Apple, Meta, and Starbucks, have also used similar tactics to lower their tax obligations. Some of the tax loopholes have since been closed, including those that figured into the so-called "double Irish Dutch sandwich" strategy.

A number of countries have also imposed separate digital services taxes on the tech giants, and efforts at a global agreement to tax them appropriately and distribute the proceeds are underway.

Anupam Mittal, the founder of Shaadi.com, recently made a statement claiming that many start-ups pay 20-50% of their revenue as "Google tax" to get distribution and protect their brand. He further compared Google to the Digital East India Company due to its dominant position in the app market and the fees it charges developers. Experts say, this is a big issue right, and Google will try to make light of it because that's what monopolists generally do.

While the Google tax presents a significant challenge for startups in India, it's not an insur-mountable obstacle. By being resourceful, innovative, and proactive, startups can find ways to succeed despite the high fees.