KATHMANDU, Aug 21: The parliamentary Development and Technology Committee has instructed the government to bring advertising in various social networking sites like Facebook into tax net.
The meeting of the parliamentary panel held on Monday directed the Ministry of Information, Communication and Technology, and Ministry of Finance to tax such transactions.
The instruction comes in the wake of the growing use of social networking sites like Facebook and Twitter by Nepali businesses and companies for publicity and advertisement. While the government has been taxing domestic transactions of advertisements, it has not been able to track advertisements by Nepali businesses or nationals placed on social networking sites which are mostly carried out informally.
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Since payments in foreign currencies are restricted by the Nepal Rastra Bank (NRB), advertisers have been circumventing the regulatory body and the government to make payment and place their advertisements on social networking sites. Many advertisements of Nepali products and services can be seen on social networking sites. Payments for such services are done illegally, draining a huge amount of foreign currency out of the country. Even politicians are found to be boosting their social media pages or posts by making payments to such sites through informal channel.
Most of the payments are made through Hundi, according to knowledgeable sources in Nepali advertising business. However, there is no credible estimate or data on the volume of advertisements made by Nepali businesses or advertisers in such global social networking sites.
“As a huge amount of money has been flowing out of the country for advertisements on Facebook and Twitter, among other social networking sites, the committee instructs the government to regulate such advertising and bring it under the tax net,” reads the decision taken by the committee.
So far, the government has been levying 13 percent value added tax on advertising transactions within the country. The government is losing millions of rupees due to its failure to bring advertising on global social media sites under the taxation system.
Advertising Association of Nepal (AAN), the umbrella body of Nepali advertising industry, estimates the annual turnover of Nepali advertising industry to be worth around Rs 6 billion, said Santosh Shrestha, the immediate past president of the association. He said that if advertisements on international social networking sites are brought under the regulatory ambit, it would make the payment of advertisements and related transactions transparent as well as convenient.
“In the lack of legal payment option, businesses and individuals, who seek to advertise on social networking sites run by foreign companies, are using informal channels to foot their advertising bills," added Shrestha. He admitted that advertisers generally request people holding international payment cards to pay for such services and repay them back in Nepal in some ways.
“The trend of advertising on social networking sites is growing rapidly. Tracking, regulating and bringing them under the tax net would not only help boost the government revenue, but also make it easier for those who wants promotion and publicity on those sites,” he added.
