Money Matters: How the new budget affects Pakistan’s entertainment industry
KARACHI: Aiming to enable local industry to compete against foreign productions, the government intends to increase withholding tax (WHT) from 10% to 20% on the landing rights of foreign produced serials. As per the Federal Budget 2016-17, it also wants to impose 20% WHT on foreign produced advertisement. Where the decision has received mixed reactions from the stakeholders within the Pakistani entertainment industry, tax experts have found it to be rather ambiguous.
An anti-growth measure
The language that the Federal Minister for Finance, Ishaq Dar, used in his budget speech on Friday was difficult to understand. For instance, he said that ‘any person making payment for a foreign produced advertisement shall collect withholding tax at the rate of 20% of the payment’. It is unclear whether the government wants to tax foreign produced advertisement or a foreign producing company involved in producing one. “Whatever I understand is that the government wants to tax local companies producing advertisements in a foreign country. Otherwise no foreign company is going to pay such a tax to our government,” Dr Ikramul Haq, a renowned tax consultant, told The Express Tribune.
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If the government wants to tax our companies for making advertisements in a foreign country, then I think the government is only going to increase the cost of doing business for our local companies, which is not advisable at all, said Haq.
“I was listening to Finance Minister Ishaq Dar’s budget speech in which he said that he will discourage foreign artists working in our advertisements. This does not happen anywhere in international trade. I do not understand one thing, why he wants to discourage foreign actresses working in Pakistani advertisements?” asked Haq.
When the finance minister said that he will discourage foreign actors and actresses appearing in Pakistani advertisements, some people thought the government is slapping this tax on the income of foreign artists. This is not the case because the foreign artists do not work in Pakistan; therefore this tax will not be on their incomes, instead it will add onto the expenses of Pakistani companies that hire them.
Stakeholders remain double-minded
Speaking to The Express Tribune, Hum Films president Badar Ikram said that while the decision was a positive one, he did not see it have any implications on the film industry in the near future. “The real impact this decision will be felt on advertisments, where you have a whole lot of foreign talent working both in front and behind the camera,” explained Ikram. “But then again if corporations can afford the high fees of foreign talent, they wouldn’t mind paying a little extra.”
Ikram, who recently produced the film Mah-e-Mir, elaborated that the film industry may not be affected immediately because, unlike other motion picture industries throughout the world, ours is not “corporatised”, as yet.
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“You don’t have any paper work in the film industry. Nobody knows how much an actor earns for a particular project,” he elaborated, “Whereas in the Television Commercial (TVC) sector there is a proper paper trail and you can cross-check invoices.”
Weighing in on the matter, film-maker, Nasir Khan appreciated the policy but described it as being more ‘protectionist’ than ‘expansionist’. “This would help protect our television industry and maybe now there would be less international television shows on our local channels,” stated Khan. The Bachaana-director felt that the government should help facilitate distributors in exporting Pakistani movies to India.
“Our cinemas help generate a lot of box office for Indian flicks. So distributors should try and work out an agreement with Indian cinemas to showcase our films,” he noted. “Doing this would help improve trade relations between the two nations.”
Actor Javed Sheikh, who is set to produce and direct his own film, welcomed the decision. “This is a step in the right direction. Measures like these reflect that the government is taking cinema seriously and it will soon be considered a proper industry,” said Sheikh. He recalled the industry representatives meetings with former Finance Minister Shaukat Tarin and Sindh Governor Ishratul Ebad where they discussed the possibility of giving our motion picture sector the status of an industry. “This will go a long way in ensuring that all standard operating procedures are practiced within the entertainment industry at large,” said Sheikh.
Sheikh said there was no harm in imposing taxes on foreign actors or talent. Citing his own example of how he has been regularly paying taxes in India for several years, he said that this decision would have no impact on Indian talent coming to work in Pakistan.
Renonwed model-turned-event manager, Frieha Altaf, who frequently works with foreign artists and models, was unhappy with the new taxes. “When you are living in a country you pay taxes. In return, the country supports you, gives you protection, electricity, water and security. You pay taxes and you are supposed to get these things in return,” she said.