Financial Times

Media groups urge Amunugama to scrap ad tax
Sri Lanka's print and electronic media recently appealed to Finance Minister Dr Sarath Amunugama to abolish the budget tax on advertising which came into effect on April 1.

The media industry believes that the tax would result in a reduction in advertising and consequently restrict the growth of trade, affecting government revenue in the long run.

In the letter addressed to the minister, the media heads say that the advertising industry, which contributed to 1 % of GDP last year, plays a big role in the country's economic progress.

"The dramatic pickup in the tourist seasons of 2003 and 2004 was a visible result of a broader expansion in advertising and promotional campaigns implemented by the hotel, travel and other affiliated industries both locally and abroad," the letter said, citing other instances where advertising had played a large role in creating an image for Sri Lanka.

The letter emphasized the work done by the newspaper and radio media, which has "in particular long functioned as the key low-cost platform for dispersing knowledge of many vital products and services: from better tools and fertilizers for farmers to improved public health or construction options to the tourist trade."

Referring to the large number of people who directly seek their livelihoods from the print and electronic media sectors, the media bosses said the media industry itself relies extensively on advertising revenue to support many who may not be directly employed, such as freelance journalists, newspaper delivery boys and lighting assistants. "There is every probability that the envisaged tax would affect the entire spectrum of service. Moreover, the cut back will make it difficult to retain skilled, creative talent which the country finds hard and costly to build up".

The 50 percent tax on advertising and promotional activities may compel companies to think twice and after experiencing a general decrease in advertising in January, all this will affect the taxable revenues of media institutions and also threaten the viability of some manufacturing companies and service providers, the letter added.

The letter was signed by the heads of Associated Newspapers, Upali Newspapers, Express Newspapers, Wijeya Newspapers, Sumathi Newspapers, EAP Networks, Vanguard Management Services, MBC Networks, MTV Channel, ART Television, TNL Radio, Telshan Network and ABC.

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