Tax relief incentive scheme for film-makers has good track record

The first time AIB Investment Managers (AIBIM) became involved in the financing of Irish-made films was in February last year, when it raised £2 million for a Disney remake of Oliver Twist.

Taking its cue from the Dickens classic, AIBIM was soon to be heard asking: "Please sir, can we have some more?"

Its metaphorical bowl has rarely been empty since. In the past 18 months it has been involved in raising Section 35 (now Section 481 after film legislation was consolidated into the 1997 Finance Act) funds for seven films, amounting to a total of around £16 million.

Its latest, and largest project to date, is Animal Farm, an ambitious adaptation of the George Orwell book for television. By the time principle filming begins in the grounds of Luggala House in Co Wicklow on August 26th, half of the £15 million budget for the film will have been invested by hundreds of AIBIM customers.

"Traditionally, what we are about is offering investment products to a wide range of the investing public," says Mr John Dunne, of AIBIM. "Section 481 is low risk but not no risk. We have a good track record in this and we haven't failed yet."

For the most part the same can be said of the entire tax relief incentive scheme introduced in 1987 to provide a boost for the film industry here.

The scheme allows investors to write off the tax payable on income invested in film projects which qualify for a certificate from the Department of Arts, Culture, Heritage and the Islands.

Under current legislation individuals can invest up to £25,000, claiming 80 per cent against tax. Between 50 and 60 per cent of a film's production budget can be raised subject to a cap of £7.5 million.

Apart from one or two notable exceptions - Space Truckers, the science fiction comedy saw some Irish investors lose out in 1996 - the scheme has operated successfully. Thousands of employment man hours have been created and the skills base of a burgeoning industry expanded and honed.

Think Braveheart, Ballykissangel, Michael Collins, Some Mothers Son and My Left Foot - all films made with the help of Section 481. More recently, Neil Jordan's The Butcher Boy and John Boorman's The General, took the leap from page to celluloid courtesy of the tax-based scheme.

However, of some concern to the film industry is the fact that Section 481 is set to expire on April 5th 1999. Despite the Minister, Ms Sile de Valera's stated wish that it be continued, speculation as to what will happen is rife.

According to a spokeswoman for the Department, the film think-tank established last June by Ms de Valera is set to deliver its recommendations on this and other film industry matters to the Minister "by the end of this year".

A Department of Finance spokesman said these recommendations will be passed on to the Minister for Finance, Mr McCreevy, who is expected to make some comment about the future of Section 481 in the forthcoming Budget.

It is "vital" that the industry is given a signal in the next Budget of where the Government sees Section 481 moving, according to Mr Michael O'Sullivan of Smurfit Paribas Bank.

One of the most significant players in Irish film financing, Smurfit Paribas Bank is about to start work on its next project - raising funds for the big screen version of Frank McCourt's Angela's Ashes.

In recent years it has raised approximately £55 million for various film and television projects, from War of the Buttons in 1994 to Saving Private Ryan, shot in Wexford last year. The bank also raised funds for Dancing At Lughnasa, a Ferndale Films production due for release in September.

In addition to Section 481, the company is also involved in discounting letters of credit and gap financing within the film industry.

"Currently, we are talking about projects for next summer, but we won't be able to talk about them with full confidence unless we know the fate of Section 481," Mr O'Sullivan says. The industry desperately needs this confidence, he adds.

The importance of Section 481 in the development of the film industry here cannot be underestimated, says Mr Colm Byrne, senior manager with accountant Bastow Charlton. "It has enticed a number of producers to make films here and the industry has expanded its skills base," he says.

The removal of Section 481 would be detrimental to the industry, he says, adding that production costs are higher here than in Britain where massive amendments are being made to tax-based schemes to attract film-markers.

With sterling at its current high level, the movie mogul gets more for his dollar in Ireland than in Britain. When, as is expected, sterling levels go down, US movie makers may find Britain, with its low production costs, a more attractive site.

According to one member of the think-tank, the renewal of Section 481 is essential at a time when film is just on the verge of becoming a fully fledged industry here.

Speaking as a partner in charge of the entertainment law department of Matheson Ormsby Prentice Solicitors, Mr James Hickey says that year zero for the Irish film industry was 1994.

It was then that the really big projects, beginning with Braveheart in 1994, began locating in Ireland. "As the legislation has been tightened up and modified over '95, '96 and '97, the investment has reached a plateau and we need a considerable boost to make us go forward," he says.

These modifications, such as the reduction of tax relief in Section 481 from 100 per cent to 80 per cent, have also meant that the incentive costs the exchequer considerably less than when Section 35 (now 481) was introduced, he says. Meanwhile, the level of film activity is currently valued at around £100 million per year.

Mr Kieran Corrigan, MD of financing and production company Merlin Films, feels that it would be useful to broaden Section 481 so that money could be raised for other aspects of film such as development and distribution. "At the moment it focuses far too much on production alone, whereas distribution tends to be much more profitable for the investor," he says.

Like many in the industry, he hopes that the think-tank will address all of these issues and make recommendations that will move the film industry forward. As Mr Hickey puts it, improvements need to be made in order to "take the industry from its current proto-industrial condition to a place where it becomes a fully fledged industry".