The American Business Council has urged the federal government to reconsider its decision to eliminate the 25 percent Sales Promotion, Advertising, and Publicity (SAP) expense policy. This move by the government disallows a significant portion of SAP expenses, resulting in higher marketing costs, particularly impacting multinational corporations (MNCs) heavily reliant on advertising for fast-moving consumer goods (FMCG). Foreign companies already grappling with current economic conditions face increased tax liabilities, creating an anti-competitive environment that discriminates against foreign investors.
Today, a delegation from the American Business Council met with Federal Minister for Investments, Aleem Khan; Chairperson of Senate Standing Committee, Finance, Saleem Mandviwala; Members of the Special Investment Facilitation Council (SIFC); and Secretary Finance, Imdad Ullah Bosal in Islamabad to express their concerns. As the leading American Chamber of Commerce in Pakistan, they highlighted the urgency of the issue.
Sami Wahid, Managing Director of Mondalez Pakistan and an American Business Council member, emphasized that if SAP expenses are disallowed, MNCs will be forced to reduce advertising budgets, placing them at a disadvantage compared to local competitors. The substantial presence of MNCs in advertising significantly impacts the economy, and punitive fiscal measures could disrupt the advertising and media industry while stifling innovation.
The delegation included representatives such as John Letvin, Economics Counselor, US Embassy; Aisha Sarwari, Senior Director Public Affairs Coca-Cola Pak-Afg; Jamil Mughal, COO, McDonald’s; Khurram Qamar, Director External Affairs Philip Morris (Pakistan) Limited; and Basit Pirzada, Head of Public Policy, PepsiCo, collectively representing about 60 American companies with substantial investments in Pakistan over the decades.
When global brands expand into new markets, they typically allocate a significant portion of net revenue—about 25-30 percent in the initial years—to marketing and advertising to establish their presence. The proposal to retroactively apply these measures after the fiscal year could damage Pakistan’s reputation as an attractive investment destination, especially as it seeks to enhance its image through agreements like the United States-Pakistan Tax Treaty and Investment Framework Agreement.
Despite efforts to portray Pakistan as a promising investment hub on par with other large markets, such budgetary changes may deter future investment, undermining progress in fostering an equitable business environment.
