Business

MarCom Collective submits proposals to PM

The MarCom Collective, an industry body comprising nine associations linked to the advertising and marketing communications sectors, has proposed that expenditure on promotion and advertising be made fully deductible and an additional deduction of 100% be allowed.

The proposal, along with others, was handed over to Prime Minister and Minister of Finance Mahinda Rajapaksa at Temple Trees recently. The meeting included a high-level delegation from the MarCom Collective comprising the conveners, the nine association presidents, and representatives of Ernst & Young.

The meeting was part of the Collective’s ongoing efforts to engage with all stakeholders in the Government and the industry to apprise them of the marketing communications sector’s contribution to the economy, which it says has largely gone unnoticed.

An independent consultancy company, Ernst & Young Sri Lanka, which was retained by the MarCom Collective to study the sector and prepare a report on a three-point agenda to mitigate, revive, and sustain the industry, presented their findings to the Prime Minister.

The MarCom Collective and Ernst & Young, in their submission to the Prime Minister, shared a range of policy measures for the consideration of the Government in order to support the sector. These proposals complement the Government’s efforts to accelerate the recovery of the sector and the economy.

They said the proposals were well received by the Prime Minister who appreciated the contributions of the sector and assured to take the proposals into consideration. The policy measures that were put forward included:

  1. Expenditure on promotion and advertising to be made fully deductible and an additional deduction of 100% to be allowed
  2. The industry be permitted to account for VAT (value-added tax) on a cash basis
  3. Finance cost incurred by the industry to be made tax deductible in full
  4. As the industry is not asset-laden, an additional deduction equal to 100% of the staff cost to be allowed
  5. Clarity on “associated persons” and “gross turnover” to apply the reduced rate for SME to be provided
  6. The gains and profits from the services provided by the industry to be taxed at a reduced rate of 14%
  7. Any reduced rate tax losses to be allowed to be deducted against profits taxed at a higher rate and tax losses be allowed to be carried forward indefinitely
  8. Preservation of cash flows
  • The Government to facilitate short-term working capital loans at concessionary rates for companies with a net annual turnover of less than Rs. 50 million to ensure payment of wages and other fixed overheads. Granting of loans should be tailored to meet the low-fixed asset base in the industry
  • The Government and all other ministries, departments, state-owned enterprises, promotional boards, etc. to immediately clear total outstanding payments due to the marketing communication industry
  1. Generation of future business
  • The Government to provide subsidised rates for advertisements on TV, radio, and newspapers. The special rates could be applicable to organisations over the next three to six months, making it more affordable to advertise using mainstream platforms and thereby stimulate demand
  • The Government to enforce strict regulations to control foreign companies from setting up operations in the country in order to safeguard the local industry. We propose that foreign companies should be set up only through a joint venture with local companies having not less than 50% of equity control
  1. Institute governance
  • The Government to establish a self-regulatory institution through a statue to provide overall leadership and govern the marketing communication industry. The control of the institution will be with the marketing communication industry whilst interfacing with the government and other stakeholders (e.g. association heads) to create an environment that is conducive for the growth of the industry
  1. Ensure succession
  • The Government to establish a separate organisation to promote media education in line with international standards. This organisation or body will assist with the development of media personnel and consequently improve the overall quality of the media sector in the country

The report also identifies that the industry generates annual net revenue Rs. 151 billion, which accounts for 1% of the country’s GDP. The industry, which employs over 100,000 people with another 200,000 dependents, needs immediate attention. The sector yields revenue of Rs. 1.510 million per employee, which is considerably higher than other key sectors such as tea (Rs. 232,000), textile and garments (Rs. 444,444), rubber (Rs. 452,308), and tourism (Rs. 1.068 million) in spite of these sectors earning their revenue in foreign exchange.

The devastating impact of Covid-19 on the industry saw the urgency for 12 sectors coming together to identify immediate measures to revive and fortify the industry with policies that will mitigate the effects of the downturn in the business and ensure long-term sustainability post revival. The constituent sectors include advertising, market research, event management, photography, video and audio productions, media planning, digital, public relations, outdoor advertising, tele/broadcast media (TV, print, radio, and online media), activations, and printing and packaging.