Why corporate tax reduction will be good for the advertising & media industry

This move will not only enable current businesses to compete with global players, but also allow many multinational companies to launch their operations in India, says Sandeep Balani, Head of India at Outbrain. 

The Indian Government slashed corporate tax to 25.17 per cent. This development has been greatly appreciated by industry players. The revenue expected out of this tax reduction is approximately Rs 1.45 lakh crore annually. This move will not only enable current businesses to compete with global players, but also allow many multinational companies to launch their operations in India, compete with local players and take advantage of lower-cost structures. 

This development is not just good news businesses, it is also good news for advertising and digital media. 

1)    Advertisers will have more money to spend

A reduction in tax outflow results in higher free cash flow. This will enable more liquidity in the market. The move would also result in advertisers to gain more investment and spending opportunities. India is now a key market for many companies to gain from the ever-growing consumer market. The rate cut is expected to boost the ad spend by 5-7 per cent for this festive quarter. Many companies are looking to expand and gain more business in the local market.  

2)    More companies will set up to compete

It will make more financial sense for global companies to set up their business units in India and compete in the local market with lucrative taxation structure. With more competition, it only makes sense for businesses to spend more on brand awareness and advertising which will, in general, create a positive impact on the advertising business.  

3)    Brand awareness and pricing related ads would increase

We would see many companies competing to create brand awareness, but only a few of them will try to take advantage of lower tax and reduce their pricing which will lead to more pricing-related and informative ads. Already, many FMCG companies have cut their prices leading to more advertising to inform consumers.