Tax credit for ad industry urged after slump post 2007
Advertising agency Core Media, in conjunction with the Association of Advertisers in Ireland (AAI), has been pushing the Department of Finance to include a 25pc tax credit for incremental advertising in the upcoming Budget in an effort to return the sector to growth.
Core Media chief executive Alan Cox said that advertising spend in Ireland slumped 41pc to €910m last year compared to 2007, with the ad spend per capita now 22pc lower than the European average.
He cited a report produced by Deloitte last year for Independent News & Media, RTE, Core Media and Google, which said that for every €1 spent on advertising here, €5.70 is generated for the Irish economy.
The report maintains that the cost to the economy of the reduced ad spend during the downturn is €17.1bn, with €3.6bn of that having been lost last year alone.
“It’s a very strong case, there’s no ambiguity and the figures speak for themselves,” said Mr Cox.
He said that he and AAI chief Barry Dooley have already held talks with Department of Finance officials regarding the tax incentive plan, and that further data is due to be submitted shortly.
Mr Cox said the cost to the Exchequer would be €23.4m over a two-year period. The incentive would only be available for advertising spend over and above 2014 levels.
“Advertising spend has been cut disproportionately,” he said. “It’s a variable cost that people look to cut and has an impact on the companies themselves and also the economy.”
The Deloitte study found that a 1pc increase in advertising results in gross domestic product per capita rising by 0.062pc. It arrived at the figure as an average across 18 countries over 15 years.
It argued that in Ireland’s case it’s more appropriate to apply the figure to gross national product (GNP) rather than GDP. Assuming a 10pc increase in ad spending from a 25pc tax credit, the return on investment in the Irish economy would be €1.02bn.
Mr Cox that a recovery in advertising spend typically lags an economic recovery by three years.
He added that once the two-year tax credit expires, the sector should be supported by increased momentum within the economy.
The advertising industry in Ireland employs about 7,000 people directly, while the Deloitte report last year reckoned there’s a total of 30,000 employed directly or indirectly by the sector here.
Mr Cox said that the direct employment level within the industry has returned to pre-recession levels.
But he said that’s because ad and media companies have had to employ more people to work on more labour-intensive digital advertising platforms, despite the overall ad spend having declined.
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