Financial Times - Multinational companies put TV advertising on hold

Recent heavy taxes on foreign produced TV commercials have resulted in multinational companies putting their advertising campaigns on hold.

According to industry sources, multinational companies have regional based promotion where they have common advertising campaigns. In such campaigns the companies mostly use foreign produced TV commercials. However this has become an unviable option due to the new levies that have been imposed. Further the telemarketing campaigns have also gone off air as the companies now find advertising an uneconomic option.

“All multinational companies are refraining from advertising on all TV channels as the cost of advertising is too high due to the new taxes in place. The tax itself will cost about five million rupees (when advertising in all channels) which can be equivalent to an advertising budget itself,” said Ranil de Silva, President of The International Advertising Association (IAA), Sri Lanka Branch.

As a result of the heavy taxes imposed on TV commercials all players in the industry are incurring heavy losses. The advertising agencies are losing revenue as clients keep postponing product launch campaigns and promotion campaigns as they cannot advertise. The TV channels are also losing out as companies have pulled out from advertising on television, explained the spokesman for the IAA.

The industry is also complaining that the Media Ministry hasn’t proceeded with a joint initiative in devising the disputed taxes. President Mahinda Rajapaksa, at a meeting with the industry, had asked the Ministry to discuss the matter with the industry. “It was suggested that a joint consulting committee be formed but this has not been done up to date,” he said. However the industry representatives have been able to secure a meeting with the authorities. “We are delighted to finally be able to meet Treasury Secretary P. B. Jayasundara,” said De Silva.