Friday, April 4, 2014

US Tax reform proposes unbelievable changes to marketing and advertising

The United States government needs money. Wars and recessions can do that to your financial health. They also want to lower corporate taxes to be more globally competitive. I guess that leads to some very different ideas being put on the table...and some stay there.

Early last month David Camp the chairman of the House Ways and Means Committee brought forward a draft tax reform package fully bent out of shape by lobbying efforts. In an effort to offset proposed corporate tax breaks he is recommending a wholesale change to the way in which adverting is expensed for tax purposes.

Camp is proposing that the first 50% of advertising costs are expensed in the year they are incurred and are tax deductible (like most other business expense). The deduction on the balance would be amortized over the next ten years. Apparently this passes for tax “simplification”. The impact of a change like this would be significant reductions in near term media spending and all that implies. Needless to say, agency, media, marketing jobs would go away. It would undoubtedly affect Canada as well.

Thankfully, what started as bi-partisan tax reform has quickly become no party non-reform. The general belief is that this bill will never make it to the floor for a vote this year.  Mr. Camp has also recently announced that he will not be running for re-election this year, making it unlikely that anyone will provide the impetus to move these reforms forward.

It still scares the heck out of me! Where on earth did it come from and can you put that genie back in the bottle? Once an idea like this gets floated it can be tough to sink. The advertising industry lobby will be doing their best to kill it once and for all.  I know that Tony Clement is not on my distribution list. I don’t think he reads Ad Age and I suggest that you NOT tell him about it.

You can read more about it, or at least verify that I am not making it up in the Adweek article here.

Lighthouse Clients

Cases, examples and client references are available upon request. Some of our clients over the last few years are:

Toyota Canada
Landmark Cinemas
Sleeman Breweries
Toronto Blue Jays
Cadbury Adams
Constellation Brands/Vincor
Cara Foods/Recipe - Casey's, East Side Mario's, Fionn MacCool's, Bier Markt, Kelsey's, Montana's
Sigma Alimentos - a large food company in Mexico
Multiple Sclerosis Society - MS WALK
Yellow Pages Group
New Balance Canada
Ideazon -(Gaming Hardware)
Edwards Builder's Hardware

Going further back:
Pfizer - Viagra, Detrol
Volvo Canada
Canadian Blood Services
Red Lobster USA
Xerox Canada
Sprint Canada
Absolut (Maxxium)

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