THE PRESS TUESDAY, JANUARY 10, 1984. Financing the film industry

Press, 10 January 1984, Page 14

THE PRESS TUESDAY, JANUARY 10, 1984. Financing the film industry

The New Zealand Film Commission will go to Cannes this year with eight films, more films than it has ever taken before. Fourteen, perhaps 15, films will be completed in the year. This certainly gives the appearance that the film industry is flourishing in New Zealand. More New Zealanders are being given the chance to see the country and the society they live in on cinema film. Other countries are enabled to see something of New Zealand and something of New Zealand’s artistic endeavour. The point is important both for New Zealanders and for the image of New Zealand overseas. The arguments for having a film industry in New Zealand are strong and the Government has declared itself intent on maintaining a film industry. The Minister of Internal Affairs, Mr Highet; repeated that the Government was committed to having a film industry when he announced revisions of taxation at the end of last year.

What has to be taken into account in the output of films is that they have almost all been financed under a system of financing which is no longer possible. The rules were changed in 1982, though films already under preparation could be financed under the prevailing system; hence the upsurge of filmmaking last year. The changes applied from the 1982 Budget, a Budget in which the Government introduced some substantial tax cuts and tightened certain provisions to reduce tax avoidance.

There was good reason to make changes in the tax shelters that were steering money into films. Investors were able, under one scheme or another, to put up money for a film, then the Film Commission would also put up some money, which was lent to the investor as a nonrecourse loan. The investors were able to claim both the money they had put up, as well as the non-recourse loan, as write-offs for tax purposes. This could remove a great deal of the risk for the investor, though at the expense of the taxpayer. The Film Commission had brought the practice to the notice of the Government. The commission still wanted incentives for investors, but thought that some of the schemes being used were undesirable. When it removed the tax shelter, the Government failed to put any significant investment scheme in its place to cushion the industry. This was something of a shock to the film industry. The film industry still received assistance from the Lottery Board, films could also receive export subsidies and New Zealand films were exempted from film hire tax, which is paid when films are shown commercially in New Zealand. The Government also made a grant of $1.7 million for the 1982-1983 year, a grant to be continued but to be reduced to zero over five years. The Government made the

grant to compensate for the private investment that it thought the film industry would lose because of the removal of the tax shelters. As expected, private investment declined markedly and because of this, and because of submissions from the Film Commission, the law was amended at the end of last year. The effect of the amendment is that expenditure on New Zealand films — films certified as New Zealand films by the Film Commission — is eligible for tax deduction in the year in which the film is completed. Under the 1982 system it was only in subsequent years that the film could be eligible for tax deduction. While this seems to bring expenditure incurred on films into line with expenditure incurred in other forms of production, it can be argued that it does not do more than that. Because of the high risks associated with film-making, there almost certainly needs to be some other form of incentive to the private investor to put up money. The tax write-off to which the New Zealand investor in films is entitled is 100 per cent. In Australia the tax write-off entitlement earlier last year was 150 per cent. This was reduced later in the year to 133 per cent and, so far, experience has shown that investment is drying up. It would make good sense for the Government to consider providing an incentive to invest in the New Zealand film industry. If a film is a commercial success, even with a tax write-off of 150 per cent or more, there will be a return eventually in the form of tax. Some tax forgone is probably the cheapest way in which the film industry can be financed. If private investment grows again, the output of films should continue. It is through the experience gained in the making of these films that even better films will be produced. Film-making on a vast and very costly scale is not likely in New Zealand. Modest productions, made with skill and care, tailored to reasonable budgets, and relying more on imagination and talent than on millions of dollars, are bound to be the order of the day. Occasionally, the results will be very satisfactory and the rewards will flow to the makers and investors. Much of the time, the industry will face losses and depend on Government support. Much more than television production, the cinema can enrich a country’s record, and the demands of production allow for more time and care to be given to the product. The film industry still needs nurturing. The taxpayers may never get back what they have put into the industry; but, given encouragement, the industry has shown sufficient evidence to justify the faith that it can turn out box-office successes that more than pay their way and a return to the taxpayers as well.