LinkedIn is taking a brave decision and planning to absorb the equalization levy that has recently been imposed on internet tech companies in India, instead of passing it on to the Indian firms advertising on its platform. This can only be called a bold move, considering the fact that other social media platforms like Facebook and Google reportedly plan to pass on the levy to its customers.
The six percent equalization levy was introduced by the Indian Government on Business-to-Business (B2B) cross-border digital transactions with multinationals without permanent establishment in the country. The step was taken in a bid to indirectly tax internet giants such as Google and Facebook on their advertising revenues from the country.
However, since the government cannot directly tax foreign companies with no establishment in the country, the burden of the tax will invariably fall on the shoulders of small firms and startups that depend on inexpensive digital marketing and advertisement methods on these platforms. But, LinkedIn seems to be opposed to the same.
"LinkedIn would deduct the tax from its own share of the pie, and not pass it to company that is paying for the advertisement," a source with direct knowledge of the matter was quoted as saying.
A source close to the development also tells that the networking giant is currently trying to figure out a tax structure that is feasible and can be placed around the equalization levy.
“The issue currently is how LinkedIn can take credit of this (equalization 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.”
In an attempt to win over the Indian digital advertising market, this move by LinkedIn could put pressure on other Internet giants like Google and Facebook to absorb the equalization levy as well.