Time for the ad industry to Re:think? Government tax white paper targets advertising scam ads

The government’s recently released tax white paper – Re:think – designed to begin a “conversation” with the Australian public, has caused a furore within mainstream advertising creative circles with its suggestion that the existing and widely-ignored 2008 Responsible Advertising and Media Enforcement Levy (RAMEL) should be increased to 30% (from the current 15%) and used retrospectively against advertising agencies and media outlets that “wilfully and knowingly practice deceptive media targeting strategies for erroneous and misleading creative purposes”.

According to one renowned advertising tax expert who prefers to remain anonymous for obvious reasons: “this is clearly a smash and grab by the ATO against the so-called ‘scam ads’ industry, whereby advertising agencies run ‘fake’ ads for the sole purpose of entering them into award shows.

“The existing legislation is broad enough to drive a Mac truck through, but by extending the RAMEL provisions to include “creativity in advertising” it opens the floodgates for ad agencies – and indeed media companies – to be retrospectively taxed at the punitive rate of 30% of the entire perceived ad spend (as deemed by the ATO) if it can be shown that the ad was not run for the intended and stated purposes of the campaign. In other words, if an agency runs an ad for a charity or other enterprise, but the clear reason the ad was run was to make it eligible for award shows, the ATO can come in and hit them for what they, the ATO, deem to be the appropriate media costs plus the full cost of the entry itself at the deemed rate.

“This could – retrospectively – cost agencies tens or even hundreds of thousands of dollars from last year’s awards. It’s an outrage and will hit certain well-known “creative” agencies where it really hurts.”

A government spokesperson refused to comment on the specific allegation, but reinforced that the purpose of the Tax White Paper was to find new ways to raise much-needed revenue and “all options are on the table.”