Call for overhaul of film industry tax breaks

The Irish film industry is in the "last-chance saloon" unless tax incentives are extended and improved, a senior film producer has warned.

Andrew Lane, the director of Element Films, which made The Wind that Shakes the Barley and Garage, said changes to the UK tax regime for films were having a "devastating impact" on Ireland's ability to attract major Hollywood films, as it had in the past.

Directors of Ibec's Audiovisual Federation, which represents the industry, are due to meet officials from the Department of Finance next week to discuss the retention of Section 481 in advance of next month's budget.

Section 481 allows businesses and individuals to offset their investment in film against tax. The current Section 481 provision will run out at the end of next year.

The latest report on the industry has shown a dramatic fall-off in expenditure on feature films in Ireland. The Audiovisual Federation estimates that only €11 million will be spent on films made in Ireland this year. This is just over a third of last year's total (€29.8 million) and a fraction of the €100.4 million spent in 2003, when the sector was buoyed by blockbusters such as King Arthur and homegrown productions such as Tara Road.

The federation estimates that, at €226 million, the total value of film, independent television drama and animation productions made in Ireland this year will be down more than €50 million on last year's total of €279.9 million.

Section 481 contributed almost half of the €184 million worth of funding which originated in Ireland. The rest of the funding came from Europe (€71.2 million) and the US (€14.9 million).

The film industry has remained buoyant because of a strong performance in the independent television sector. This is as a result of major productions such as The Tudors and continuing investment in drama by RTÉ. The amount of money spent by the sector is expected to increase from €113.8 million last year to €154 million this year.

The federation wants Section 481 tax relief to be extended until 2012 and for the individual investment limit to be increased from €31,750 to €150,000 with tax relief on the entire sum rather than the 80 per cent limit at present.

Another significant measure would involve the definition of eligible spend to cover all film-making activities including, for instance, the salary of a big-budget Hollywood star.

Mr Lane said the UK had introduced a new tax-credit scheme as a direct response to the success of countries such as Ireland in attracting major Hollywood productions.

The eligible spend in the UK includes the entire budget and there is no cap on the size of the production as there is in Ireland, where the limit is €35 million, according to Mr Lane.

"US productions are incentivised to maximise their spend in the UK. All the studios in the UK are choc-a-block. They are experiencing an increasingly significant increase in their inward production, primarily from the US," he said.

"If there is not an extension announced in the budget or in the finance Bill, it effectively means that the finance budget for film in Ireland finishes at the end of next year. That would send out a message to Hollywood, loud and clear, that we are pulling down the shutters and we're not interested in film in the future."

Audiovisual Federation director Tommy McCabe urged the Government to publish the Indecon report into film financing which was commissioned by the Department of Finance. He also said no changes should be made to the tax regime without consulting with the industry.

"Section 481 cannot stay as it is," he said. "We understand that it will be retained in the future, but the devil is in the detail. We feel that changes are certainly needed at this point in time."