The news that Section 481 tax relief for investment in film production have been extended for just 12 months has been greeted with annoyance and unease in the film industry in Ireland. It is a short term measure in an industry which needs long term stability to plan projects at least a year in advance. This is a holding measure without any clear indication of what the Minister is planning for the future. The governments response to mounting criticism is that the issue is "pending full consideration of special studies on film relief to be published by the Minister for Arts, Heritage, Gaeltacht and the Islands".
The Minister is still awaiting a further report on the industry from a "think tank" comprised of industry representatives and practitioners which is due before the Minister 'imminently' and it is believed it will come out strongly in favour of the retention and extension of the Section 481 tax incentives. It will be up to the Minister to then decide whether or not this report will be published.
It is another report commissioned by the Minister for Arts, Heritage, Gaeltacht and the Islands, Ms de Valera, as part of the "special studies" which was delivered before Christmas by an Indecon consultant, Mr Alan Gray, which threw the cat among pigeons so to speak as it is critical of the current tax relief system. Since this report there has been growing unease as to which way the Minister would jump and many hoped the finance act would clear the air which obviously hasn't happened.
The crux of the current debate over the value of the tax incentives lies on differing interpretations of the economic concept known as a multiplier effect. A multiplier basically means, in this instant, that the exchequer foregoes a certain amount of direct taxable monies in the expectation that that the investment this attracts will create equal or greater returns to the exchequer through employment generated and services bought within the state related to the investments. The problem is that, as we all know, no two economists can agree on anything and if there is one issue that is guaranteed to have two economists go for each other with their sharpened pencils its multipliers. You either believe in the concept or you do not and never the two shall meet.
It should be noted that every industry report published since Christmas has gone to great pains to explain in detail how they calculated the multipliers used in calculating their results. 'The Bigger Picture' - An independent economic report commissioned by Film Makers Ireland on the Irish Film & Television Industry from David McWilliams of Iconic International Advisors which was published on Wednesday (17/2/99) makes a point of this issue. (IFTN has a brief summary of in todays news and we will include a more detailed review of the main points next week.) But the reality of the issue is quite clear the boom in Irish film production would not have happened without the tax incentives, so much so that a lot of other countries are looking to the current system as the way forward particularly our nearest neighbour the UK. It seems suicidal to discard such a practical and useful tool which is obviously working. It is hoped this issue will be speedily resolved and the incentives are extended and committed to for at least 10 years.
Michael McMahon 18/2/99
