Outdoor Ad Industry in Peril due to Haphazard Taxations
Unhindered bureaucracy is known to plague the state of administrations in Nepal, more so across the government level. Be you an individual or a business entity, not a day goes by in this country without disconcertedness if you have to deal with legal affairs concerning the government. Such an issue has come into light that has raised eyebrows across the advertising industry. Ridiculous tax regulations on outdoor advertising mediums have received condemnations from businesses, agencies and other major stakeholders of the ad industry. An amendment to this is a must if the business industry is to proceed at full throttle.
Extreme Tax Rates
There is nothing wrong with levying taxes on the advertising activities of businesses. But questions of practicality are bound to surface when the tax rates of Kathmandu Metropolitan are beyond reasoning. Putting it in numbers will clarify the absurdity of the issue.
Let us assume that a 25 * 60 square foot hoarding board of a brand costs around Rs 100,000 monthly (Rs 1,200,000 yearly). As per the fixed tax rate of the Kathmandu Metropolitan City which stands at Rs 1000 per square foot for hoarding boards, the brand needs to pay a tax worth Rs 1,500,000 yearly. Such exorbitant taxation is a major deterrent for brands as some are bound to refrain from outdoor advertising citing unappealing value for investment. As such, the entire business industry will be decelerated if brands become unwilling to conduct outdoor ad exercises.
Another very dumbfounding issue is the tax rate levied on the neighboring Lalitpur Metropolitan City. A hoarding board advertisement of a brand in Lalitpur is taxed at Rs 200 per square foot. This unfathomable discrepancy between the two cities that are only separated by a river is laughable. While both sides of the river maintain equal visibility of hoarding boards, Kathmandu Metropolitan seems to place undue pressure on outdoor ads of brands.
The Tax Dilemma
Perhaps the debatable process of collecting taxes has resulted in the absurdity of the issue. The government of Nepal believes that the collection of taxes for some of the major advertising locations is best left in the hands of the private sector. Add irrationality and lack of transparency to that and only then can you justify the current state of tax affairs in outdoor ads. Private agencies have been delegated the authority to question brands and businesses about their tax obligations. Moreover, there is no clear explanation about how the rates have been determined, what portion of the collected amount is enjoyed by the private agencies themselves and what amount is received by the government. The obscurity of the issue is a major discouragement for the industry as large sums of money are shied away by brands to avoid exorbitant tax rates.
Taxes are an obligation of every citizen and business entity operating in a country. Ensuring that tax obligations are fulfilled is a rightful gesture that is to be done by any government. However, levying tax rates that are highly intimidating right off the bat is not conducive to a progressive economy. The nascent advertising industry of Nepal will be seriously afflicted by such irrational taxation as businesses will turn away from outdoor ads. Moreover, the entire business industry is bound to slow down if the haphazard taxation on outdoor ads is not addressed by the government. On an optimistic note though, we have institutions like Nepalese Marketing Association (NMA) and Advertising Association of Nepal (AAN) working for the welfare of the ad industry. It will be an interesting sight to witness what stance the aforementioned institutions will take to alleviate the situation.