Deadly Bounce

A budget bombshell to part classify advertising and promotional expenses as taxable income has put the industry and its allied services in a spot, with advertisers also grumbling of a plethora of taxes. A budget bombshell to part classify advertising and promotional expenses as taxable income has put the industry and its allied services in a spot, with advertisers also grumbling of a plethora of taxes. According to Finance Minister Sarath Amunugama, 50 percent of future advertising expenditure is taxable under the corporate tax banner.

In laymen’s terms, a company’s advertising and marketing budget was earlier allowed to be classified as a deductible expense. Under the new classification, only 50 percent is allowed and the balance is added back to income and taxed at 32.5 percent.

“It will apply on promotional activities except for recruitment and tender ads. All other commercial stuff, like below and above the line advertising and promotions will now come under the new terms,” explains R T L Weerasinghe Commissioner Large Taxpayers Unit of the Inland Revenue Dept.

The fun starts thereafter. Advertisers, media, production houses, billboard promoters and packaging fraternity, have to fight f