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AV Federation Calls for Change in 2006 Budget
08 Nov 2006 :
The Audiovisual Federation of Ireland has published contents of a letter to Brian Cowen, TD, Minister for Finance, calling for the introduction of a more competitive tax incentive for film and television production in Ireland in the next Budget.

The contents are as follows:

Dear Minister

The Irish Film and Television industry continues to be an important employer with approximately 4,300 employees spread across the sector. In addition to the net economic contribution made by the sector, it also plays a crucial strategic role in positioning Ireland as a key supplier of content in an era of multiplying distribution platforms. This is vital in ensuring that Ireland is best placed to grasp the opportunities that will exist in the knowledge-based economy of the future where content and intellectual property, rather than manufactured goods and agricultural produce, will be the mainstay of our export efforts.

The recent acquisition of YouTube.com, a company only founded nine months ago by Google for $1.6bn, graphically demonstrates the ascendancy of the content based business model, in this case user generated, and the rapid pace of change that is going to affect us all.

An Ireland that recognises and nurtures its creative industries as a key strategic partner in meeting the challenges and opportunities of a digital economy, is one that will be better placed to prosper from those opportunities.

Encouraging inward investment in the film and television industry in Ireland from overseas, and from the US in particular, is a crucial component in the strategy of staking a claim for Ireland in a digital economy where “Content is King”. The activity that is leveraged in Ireland by the provision of S481 funding is essential to maintain and develop the infrastructure that sustains both indigenous and international film and television productions shooting in Ireland; it provides crucial opportunities for skills transfers from world class technicians to Irish crews and it allows Irish creative talent showcase itself on the world stage.

There are other important factors in favour of having a competitive tax incentive for film and television production in Ireland, the most important of which is arguably cultural. Film and Television are mediums that allow important facets of Irish life, culture and history be explored and disseminated to an International audience in a powerful way. The extraordinary international success of THE WIND THAT SHAKES THE BARLEY illustrates how feature films can be as powerful an ambassador for aspects of this country as sporting success on the international stage can be. The level of funding available for indigenous film and television production in Ireland (being projects developed and produced in Ireland with Irish talent for the Irish market with an eye on the potential of the international marketplace) still falls far short of most other European countries, even when S481 is taken into account. Notwithstanding that, S481 is pivotal in ensuring that indigenous production is sustained in Ireland and inward investment is incentivised to locate here.

The changes introduced in your last budget represented a significant enhancement in the scheme. These changes coincided with the introduction of a new incentive in the UK, the effects of which have meant that the benefits of your efforts to date will not be realised in terms of feature film production. As a result of recent changes in the UK incentive for film production, Ireland now finds itself at a serious competitive disadvantage when competing for US productions that are looking to shoot overseas.

Since the introduction of the changes to the UK incentive, we have seen a dramatic reduction in the level of US financed and produced feature films shooting in Ireland (in the period 03/04 US films in Ireland spent €96m on local labour, goods and services, in the period 05/06 that figure has fallen to €2m). The UK has seen a significant rise in the number of big budget US productions shooting there in 2006 compared to previous years.

The IBEC Audiovisual Federation has formulated a number of proposals designed to restore competitiveness with the UK, our greatest competitor for US inward feature film investment:

Increase the relief available to individual investors from 80% of their investment to 90%, or where they are investing in indigenous productions, 100%. Historically the relief available for S481 investors was 100%. All other existing tax incentives in Ireland provide for 100% relief. If we are to regain a competitive advantage on the UK this proposal is essential. The increase in relief for inward productions to 90% would restore our competitiveness with the UK. We are proposing a higher level of relief for indigenous films to recognise that those are the films that require the greatest level of support and are the ones that will create the long term value for the economy where they are commercially successful.

It is our view that the level of demand from the investment community for S481 approved film and television projects, together with the competition that exists between various financial institutions that act as intermediaries is sufficient to ensure that any increase of this nature would go to the production, rather than lead to leakage through transaction costs or a higher investor return on their investment. Our members are satisfied that it would be possible to work with the Irish Film Board to create measures that ensure that the increase in relief will be delivered directly to productions.

Amend the definition of eligible spend to include all film making activity in the State. This would neutralise the significant advantage that the UK now has in terms of enticing US projects to the UK and away from Ireland due to the fact that the State benefit is calculated on all activity in the State whereas S481 is based on Irish Goods and Services and only EU labour working in the State. This measure would also address the anomaly whereby we are signatories to two International bilateral treaties (with Australia and Canada) which convey a benefit to the Irish producer but none to the Australian and Canadian producers as nationals from either of those countries will not qualify for any S481 benefit for the time that they are working in the State. This is an important consideration as the Minister for Arts, Sports and Tourism plans to enter into a number of other bilateral treaties in the near future.

Increase the cap from €35m to €50m. The PWC report commissioned by the Minister of Arts, Sports and Tourism in 2003 demonstrated conclusively that the greater the budget of a film the greater the benefit to the Irish economy. The existence of a cap on S481 fundraising per project of €35m is a significant marketing disadvantage for us as there is no corresponding cap in the UK. Our preference is that the cap be abolished, but failing that it should be raised to at least €50m – such a measure will mean that we are a more attractive option for bigger budget films.

Commit to an extension of S481 to 31st December 2012. Experience in Ireland and the UK over the last number of years has demonstrated that inward production requires a stable fiscal policy in terms of production incentives. Where the commitment of Government to supporting production incentives is in question there is an immediate fall off in inward investment. This is primarily because of the long lead in times required for feature films and television drama which require a stable funding environment in order to proceed with a decision to locate here. We also know from experience that we will only get one chance to “re-launch” Ireland as a key location for international productions – it is therefore vital that in addition to implementing our proposed changes to S481, that the Government is able to commit to an extension for a further four year period and announce that in this forthcoming budget.

Raise the cap on an individual’s investment from €31,750 to €50,000. The cap on the amount that an individual can invest to attract S481 relief as been set at €31,750 since 1984. In real terms this figure has diminished significantly when inflation is taken into account. The increase in the cap on the amount that can be raised per project from €15m to €35m last year means that it would now take 1,100 investors to complete fundraising for a big budget film that raises the maximum amount permitted, which represents a significant administrative inconvenience. In order to address this problem we are proposing that the maximum which any one investor could obtain relief on would be increased from €31,750 to €50,000.

By adopting these amendments the Government will be demonstrating its continued support for the creative industries in Ireland and its intention not to be outdone by competing Countries in terms of incentivising inward investment to this country. That is not to say that we are advocating an open door policy that simply improves S481 every time there is a change in the UK. Our research suggests that having invested a lot of time and resources in designing a new incentive and having consulted widely on its details, the UK Government has no intention in revisiting the structure or benefit of its scheme, regardless of developments in other countries.

We would be delighted to meet with you or your officials if you would like to explore any aspect of these proposals any further. Best wishes,

Andrew Lowe, Chairman. Film Finance Committee, IBEC Audiovisual Federation

Tommy McCabe, Director. IBEC Audiovisual Federation

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