ISSN: 1391 - 0531
Sunday, July 08, 2007
Vol. 42 - No 06
Financial Times  

Clash over controversial TV tax

A war of words erupted at a meeting called by the Treasury on Tuesday between film industry personalities and TV industry officials over a controversial tax on foreign tele-dramas and English movies, witnesses said.

Treasury officials looked on helplessly as a verbal duel broke out between veteran actor Ravindra Randeniya, a former UNP MP and now a close supporter of President Mahinda Rajapaksa, and Chevaan Daniel, Head of Channel One-MTV over a tax the TV channels were reluctantly paying.

Channel heads and senior officials of MTV, Sirasa, ART, ETV, Swarnavahini, ITN and Rupavahini were present while Derana and TNL were not represented. Heads and spokespersons for MTV, Sirasa and ETV expressed concern that the tax, introduced in the 2006 budget, was drastically affecting the financial viability of the stations and urged remedial measures.

TV industry sources said Capital Maharaja had stopped paying the tax for the past two weeks in protest.

In the midst of it, a representative of the Media Ministry was dragged into a dispute when she said proceeds of the tax would go to set up a film park in the south, a development that stumped industry personalities that included Douglas Ranasinghe and Sangitha Weeraratne.

It was revealed that the government had so far collected Rs 164 million – of which more than Rs 100 million came from MTV/Sirasa -- as revenue from this tax but didn’t know what to do with it until the Media Ministry representative said a film park was being considered.

Film industry representatives then turned on this official and angrily said they had not been consulted on the proposal.
TV channel heads said they were informed by telephone of a meeting to discuss the TV tax levy but learnt to their dismay that it was all about the film industry and less about the controversial tax.

“We were called on the phone and told the meeting was to discuss tax levy on tele-dramas. When they started the discussion it was on the state of the industry and I objected saying we had been summoned for a different purpose,” said Daniel, adding that the TV tax was ‘very unfair, eating into revenues and channels would be forced to close if it continues.” When Randeniya retorted saying MTV was making lot of money, Daniel rejected the claim saying “you wouldn’t know how this business operates as programming and production costs a lot of money and we have to pay staff.”

Daniel also got involved in a spat with Weeraratne when she said dubbing staff at TV channels could not be considered as artistes. “We have an entire dubbing section where we employ many staff. They are all part of the industry. It’s unfair to say they are not part of the industry,” he said.

But R.P.L. Weerasinghe, Tax Advisor at the Treasury, who was present at the meeting,

denied that the meeting was intended to discuss the TV tax levy. “We called the meeting for two reasons --to discuss the proposals made in the 2006 budget on concessions to the film industry and the levy on tele-dramas. We also wanted to know about the collection and what was happening to it,” he said.

But he conceded that no written invitation had gone out. “It was an invitation by telephone,” he said adding that these meetings were routine ones they call with all sectors to discuss budget issues. Weerasinghe said it was part of a continuous dialogue with various sectors and not meant to take decisions. “We however asked those present to send there proposals in writing,” he said.

The ETV representative said the tax was a huge financial burden to an English language station. He said the tax was very unfair to English language channels which represent just about three percent of the total TV audience and is no threat to the Sinhala film and tele-drama industry.

Daniel said it was illogical to tax one industry to sustain another. “It’s like taxing CNN to sustain Hollywood,” he said in a view shared by the ETV representative.

The Channel One chief said there was only two hours of dubbed programming on Sirasa per day which was unlikely to affect Sinhala tele-dramas. Advertising revenues had also fallen by 40 percent due to the uncertain economic situation, making the tax payment unbearable, he said.

The ETV representative said they had cut programmes by 50 percent since the tax payment came into force. “I must say the authorities reduced the tax from what was proposed in the budget for English programmes but still this represents 20 percent of our revenue we generate from imported content. That has a huge impact on profitability,” he said adding that they absorbed the cost because “our commercial appeal is much less than the Sinhala language channels.”

While saying that ETV has paid ‘every cent of this tax so far,” he noted that the tax had hindered revenue earning capability and cash flows. “We have to pay even before we air it. On the other hand we give the market 3-4 months credit. Our profitability has been eroded and cash flows severely constrained,” he said adding that the whole financial viability of English language TV has been compromised.

The levy was introduced to protect the local Sinhala tele-drama industry and film industry representatives agreed that it was not meant to penalise English language television. “Their intention was to penalise the channels that were importing Hindi content and dubbed in Sinhala. We are not a threat – we are complementary industry to the local Sinhala teledrama industry. So why penalise us? What about the people we employ who produce a lot of local English content,” the ETV spokesman asked.

The tax rates for English programmes are Rs 10,000 for every half hour and the same for repeats and Rs 1,500 for every extra minutes thereafrer. For English movies its Rs 25,000 without dubbing, first repeat telecast Rs 10,000 and second repeat telecast Rs 5,000 within two months. For non English movies and any other language film without dubbing except Tamil its Rs 200,000. Any imported programme dubbed in Sinhala, Tamil and English would be charged Rs 90,000 for 30 minutes or less with every five extra minutes be charged Rs 15,000. The tax collection has been made for the past 11 months incouding July.



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Copyright 2007 Wijeya Newspapers Ltd.Colombo. Sri Lanka.