The possibility of introducing a tax credit for Irish advertisers formed the basis of discussions between the Department of Finance and representatives of the Irish advertising earlier this week.
Barry Dooley, the chief executive of the Association of Advertisers in Ireland (AAI) and Alan Cox, CEO of Core Media met with officials from the Department of Finance to discuss the importance of advertising to the economy and the economic benefit that could be derived by the introduction of a 25% tax credit, similar to the successful R&D scheme which has been in operation for a number of years. According to Cox, the credit would be applied to any increase in spend over and above 2014 levels and any such scheme should have a lifespan of two years. After that, the general momentum in the economy should replace the need for any further stimulus.
According to Cox €1.55bn was spent on advertising in 2007. By 2013, however, this spend had fallen to €910m, a decline of 41%. Cox as well as a number of other leading advertising industry figures, have argued that Irish advertisers have been significantly under-investing in advertising in recent years with Ireland’s advertising spend per capita being 22% below the Western European average in 2013. By comparison, ad spend in Ireland was 13% above the Western European average in 2007.
This has done significant damage to business and the Irish economy in general. A study conducted by Deloitte in 2013 found that €1 spent on advertising generates €5.7 for the Irish economy. Therefore, the cost to the economy of our declining spend was €3.64bn in 2013 alone, or €17.1bn since 2007, says Cox.
However, in what Dooley describes as a challenging meeting, the Department officials expressed concern over the findings of the study and said that there is no historical evidence that advertising is a significant driver of economic growth. They also quoted the absence of any commentary in economic journals on the subject. Cox quoted from other corroborating studies that have been published on the matter, but the officials position remained unchanged. However the officials did say that if the multiple is accurate, it would be an obvious choice to be incentivised, as long as it was deemed not to contravene EU Sate Aid rules.
According to Cox, the AAI and Core Media will set about gathering further evidence and re-submit the case to the Department in the future and to this end, the AAI has already been in touch with the World Federation of Advertisers to become involved in the initiative.