January 15: Nepal Rastra Bank (NRB) is working on a policy to manage payments for advertisements in social media. Under the policy, payments for social media ads will have to be made through banks and other formal financial channels.
The government has been expressing concern about Nepali advertisements on platforms like Facebook, Instagram and YouTube and the outflow of capital it entails. Therefore, the central bank is preparing to bring such ad payments under the legal framework.
Guru Prasad Poudel, acting executive director of NRB Foreign Exchange Management Department, stated that the issue had already been included in the monetary policy for 2019/20 and that the bank was now preparing to implement it.
“Necessary policy will be formulated and implemented to manage the foreign currency receipts from and payments for the advertisements in social media and online sites,” the monetary policy states.
Poudel stated that the bank was arranging to bring such foreign currency transactions under the legal domain. “After this, online companies will have to pay taxes on the money they earn from Nepal through advertisements.”
Poudel informed that there was no concrete data on how much foreign currency was flowing out of the country in the name of social media advertising. “Yet, we estimate that the amount is somewhere between Rs 4 billion to Rs 5 billion,” he said adding, “Even if only 20 percent of that amount is taxed, the state stands to gain Rs 1 billion.” He further clarified that bank’s intentions were not to curtail social media advertising but merely manage its payments.
“Currently, people pay through the credit cards of their friends and family residing abroad or through illegal means like Hundis,” he said. But other stakeholders claim that the implementation of any such policy would be challenging.
The issue of social media advertising is also included in the Information Technology Management Bill recently endorsed by the Development and Technology Committee of Parliament.