AMENDMENT REFUSED.

Auckland Star, Volume LXI, Issue 229, 27 September 1930, Page 14

AMENDMENT REFUSED.

FILM TAX LEGISLATION. 'WILL NOT CRIPPLE INDUSTRY' GOVERNMENT'S DETERMINATION. (B.v Telegraph.—Press Association.) WELLINGTON, Friday. In view of the lengthy' statement on the film hire tax recently published by Sir ictor Wilson, the acting-Prime Minister, Hon. E. A. Ransom, to-day, issued the following statement:-— The film industry is admittedly a very difficult one to understand and Sir Victor Wilson in his statement has taken advantage of this difficulty to confuse the issue. To understand the position it must be realised that 80 per cent of the films screened in New Zealand are distributed by companies owned and controlled by American film corporations. It should be also noted that the price charged to a local company for films is not a fixed or stated amount, but a percentage of the ; .gross rentals received by that company from New Zealand theatre proprietors. During the exhaustive inquiry which was made into the industry by a Parlia- • mentary Committee in 1928 it was found that not one of the local subsidiary com- | panics had any information available as to the cost or the value of their films, j It is therefore impossible to make comi parison, as Sir Victor Wilson attempts [ to do, with an ordinary business, where an exact knowledge of the'cost of the j goods is the first essential of all dealings. "Most Equitable Basis." f Production costs of films have no bear- ■' iug on receipts from sales or proceeds I from renting the films, which are very I largely dependent on the incalculable i| factor of public fancy, which varies from L country to country. For this reason the [: allocation of proceeds received and, genjl orally, the whole finance of the film bill dustry in the Dominion, are based on i 1 and work backward from box officc rcceipts. If this has been found to be the most practicable basis for the general j; finance of the industry it is obvious that j! it is the most equitable basis for taxa-1 !| tion. I Sir Victor Wilson says that additional !l revenue could best have been obtained if by a fiat Customs duty of so much per ! foot of film imported, but it will be clear j to all that when one film brings in perI haps £10.000 and another perhaps only | £1000, such a basis of taxation is quite unsound. It would be just as logical to | tax cloth by the yard, regardless of j whether it was silk or cotton. Further, ! inquiries showed that since the previous | investigation in 1928 rentals received I from New Zealand theatre proprietors ! had doubled, but the amount collected in Customs duty on the footage basis had decreased by over £10,000. It was tnerefore evident that the tax was unsatisfactory and renters were escaping reasonable taxation. j Offers of Assistance. I It is stated that the distributors had offered a guarantee that an increase in the footage tax would not be passed on to existing contracts. While this is correct, it does not amount to much, as contracts are of comparatively short duration and are maturing daily. A further r suggestion of the distributors was that a 2i per cent tax should be levied upon the whole of the box-office receipts, to be ! y borne by the various parties concerned, I in accordance with the allocation of those [ receipts. This, however, would have been [ unfair to the exhibitors, who already i have to pay local rates and income taxes ( knd are affected by the amusement tax. [ The offers of assistance were thus ; — mostly suggestions to place the tax I dircctly on other parties. The film hire [ tax is an ad valorem one, based on the . real proven import value of the film, that is, the actual rentals received, less the actual costs; and assumed profits. Thus, if it be borne in mind that the percentage f- of gross rentals received by an American corporation is in fact the cost price to the New Zealand subsidiary, and that this cost price is the "net receipts" or the import value on which the ad valorem tax is imposed, it will be apparent that Sir Victor's objections to the principle of the tax fall to the ground. \ Closing a Loophole. The basis, which he states as impossible, i.e., "that the total duty is unknown until the film has completed its circuit," is exactly the basis on which the whole industry operates. Exception is taken to the fact that 12i per cent of the gross rentals received is regarded as income for purposes of taxation, but the reason for this will be evident from the facts stated above. As there are no import values apart from the net re- . ceipts from 'tlio sales; it was obviously open to the film renters, by arrangement with parent companies in America in i'; regard to the amount to be debited in j the books as buying prices, practically to ; escape income tax altogether. In conncction with the alleged assur- ; ances given oh August 8,1 may say that the Prime ; ; Minister accepted audited * figures supplied by Sir Victor as the basis for reviewing the Budget estimate, which' was subsequently, increased to £50,000 for eight months, but not to the, figure of: £97,000 for 12 months as stated by Sir Victor- The promise given by . the Prime Minister was not that the Budget figure would not be increased but that the matter would be considered by Cabinet. , . - However, the position changed owing to the fact that Cabinet to modify the proposed taxation on the industry by the removal of the amusement tax oh lower-priced theatre seats. Accordingly Cabinet decided on August II to • retain the film hire tax at the original percentage.

J "Little Basis lor Agitation." i In liia statement Sir Victor quotes a certificate from a local firm of accountants to the effect tliat based on film hires l'or a period of 10- weeks, the tax would produce. £88,500 in a year. This would mean £59.000 for eight months, without any allowance for the probable falling | off in receipts on account of the hard | times, against the Government estimate • of £50,000, so that there is very little basis for all the agitation on this point. In conclusion I may say the film hire tax was very carefully considered by the Government before the legislation was passed and the Government cannot agree I to amend that legislation until we have v bad some experience of the tax in actual I operation and definite defects or real I hardship can be shown to exist. As the | industry is carrying with comparative equanimity in other countries taxation at least as heavy as, if not heavier than, has been imposed in New Zealand, it is nuite evident that the amount to be paid until such time as a Teview can be mad< will not cripple the industry. Therefore it is clear that the actioi bein"" taken by the film renters at tin 'instigation of the American film or Sanitations is being directed solely at th srm of tax. In this connection I have t V that the Government will not con ,S -W further taxation on a footag l ;g but iB willing to hear any represer + ons i ll re g ar(i taxation on an a i ilrpm basis with a view to poesib] ' legS® B SM 4B ®*® ssi SSBfefc"