IAB Europe Blasts Greek Online Ad Tax Proposal

Online ad revenues in Greece grew 50 percent last year. Yet despite the burgeoning success of the industry amid an otherwise decimated economy, the Greek government has proposed a tax on online ads sold by news sites.

An article introduced into a pension system reform bill calls for a 21.5 percent tax on online ad sales made by news media outlets, according to Zorbas. The proposed tax would apply to online news outlets covering political, social, economic, cultural and sports news, in addition to reviews, interviews and discussions.

“We hope that the government might reconsider [the tax], and this is what we’re trying to achieve with going public,” said IAB Europe VP Kimon Zorbas.

Zorbas said the tax would only affect companies based in Greece. Therefore, media firms without a physical presence in the country would not have to pay the tax, potentially benefitting non-Greek media outlets that can undercut ad prices charged by Greek firms. Indeed, the tax would fund pensions for journalists, the very people whose employers’ businesses could be hampered by such a tax.

IAB Europe is investigating whether the proposed tax would be legal under European Commission law. “Currently we are having our law firm look into this, and if we find that we are right…we might consider several actions,” he told ClickZ News. Zorbas said the IAB Europe might launch a complaint against the Greek government, or the European Commission may take its own action.

The Greek Parliament is expected to vote on the bill on July 8. The bill’s draft has been approved by its cabinet of ministers.

“The overall impact on the market may not prove to be too severe as the law targets a particular segment, i.e. Greek news portals that produce their own content, thereby leaving out aggregators, non-news driven sites and, of course, international properties such as Yahoo, Google, Facebook, or MSN,” said Constantine Kamaras, founder of IAB Greece and head of its Public Affairs Committee, in an e-mail.

However, he does believe it will penalize Greek news sites producing their own content. “Greek news publishers that invest in owned content will find their prospects very much dented as they would face a stark choice between becoming 21.5 percent more expensive or, if they keep their prices stable and ‘absorb’ the tax hike, reducing their margins by the same amount. I could hardly [envision] a measure that would distort competition in a more outrageous manner or penalize the ‘quality’ end of the market,” he added.

According to IAB Europe, online ad revenues in Greece reached €68.5 million ($83.5 million USD) in 2009, €40 million going towards search ads and €28.5 million spent on display ads. It’s that display ad market that would be hit by the proposed tax.

The online ad sector in Greece is still small. Although Zorbas said the Greek market grew 50 percent in 2009, he said, “Only five percent of all [advertising budgets] are spent on online ads.”

The full text of the bill is available in Greek here.

Follow Kate Kaye on Twitter at @LowbrowKate.