The country’s top body for all major advertising companies, the Advertising Agencies Association of India (AAAI), has on Tuesday written a letter to Information and Broadcasting Minister Prakash Javadekar. In the letter, AAAI has recommended to the government to treat advertising expenses as investments and allow amortisation of the cost over the next three years.
The objective is to encourage companies to spend on advertisements and in turn help in the faster revival of the economy. In the letter, AAAI also pointed out issues faced by the industry in the wake of the novel coronavirus pandemic and the subsequent lockdown enforced due to it. The advertising body also gave suggestions to revive business in ways that don’t impact government revenues.
“As advertising costs a lot of money and public listed companies are conscious of spending, one suggestion AAAI made was that if advertising could be amortised over three years, it could provide an incentive to cash strapped and stressed advertisers,” read the letter. AAAI further said that on a Rs 100 expense, an advertiser be allowed to claim an expenditure of Rs 200 while computing the taxable income.
“The income and cash flow has been in serious stress in the last month and unless there is some intervention, many businesses will either file for bankruptcy or will have to under-size considerably,” AAAI added in the letter.
AAAI president Ashish Bhasin told a leading daily that the advertising industry is like the lubricant to the economy and the lubricant for the advertising industry is liquidity. He said that a whole ecosystem of television channels, newspapers, radio and other media depends on the advertising industry.
“If we can infuse liquidity in advertising by encouraging profitable companies to continue to advertise, it will spur consumer demand, which in turn will kick-start the economy. The positive benefit from an improved consumer demand will far outweigh the offsets we are asking for,” he added.