TAXATION OF FILMS

Evening Post, Volume CXI, Issue 3, 5 January 1926, Page 7

TAXATION OF FILMS

NEW SOUTH WALES MOVE

PBEVJ3NTING EVASION.

(From Our Own Con-Kpandsnt.) SYDNEY, 80th December. An amendment of the State Taxa tion Act to provide for the taxation of American film companies exploiting the Australian market pawed into l«w at the tail-end of the Legislative Assembly's session. Mr. hug introduced it suddenly, taking member* of the Home and representatives of the film distributing industry completely by surprise. It ii alleged that the American companies have been «v»d- ---| ing the payment of adequate taxes. Mr, Lang's amendment will ensure that they will pay 25 per cent, of the proceeds of a lease or sale of a film into the State Taxation Department. Briefly, the methods of the filmmanufacturing companies in the United States, which supply 95 per cent, of Australia's needs, is to lease their films to subsidiary companies in Australia, which, in turn, hire them out to exhibitors. Each of the big manufacturing concerns own or control the subsidiaries. But so profitable are the films that had the subsidiary companies been charged fair value, enormous profits would have come under liability of the companies' taxation. To cut down this profit, the manufacturing companies of California* and elsewhere charged their subsidiary companies (really themselves), overhigh rates for the leasing of films. Thus the profits of the subsidiary companies were cut to a minimum, and either paid but a small company income tax or none at all. But the profits had been sent out of the country to the parent companies by way of exorbitant lease values. Mr. Lang, in explaining the measure in the Assembly, charged the subsidiary companies with paying as much as 75 per cent, of their gross takings to the American companies, amounting to. hundreds of thousands of pounds year-' ly, without paying a penny in tax. The move to rope in tbi:i taxable income started in South Australia, where the Labour Premier (Mr. Gunn) actually moved similarly to Mr. Lang, but found that as the subsidiary companies' headquarters were outside his State, principally in Sydney, his effort to make them pay tax would have been futile. Mr. Lang's amendment was: "To provide for the taxation of taxable income derived from the disposal to a person in the State, whether by sale, lease, or otherwise, by a person whose principal place of busi' ness is outside the State, of any motion picture film not manufactured in Australia for exhibition, pr advertising matter relating thereto or the right or license to exhibit the film or advertising matter, or any other rights in connection with the use or exhibition in the State of any such film or advertising matter, and which taxable income has been received during the twelve months ended 30th June, 1925, and in each subsequent year at the rato of 5s in the £■ of such taxable income, or at such less rate in the £ as may for any year of income be fixed by the Governor and notified by proclamation published in the 'Gazette.' " THE PUBLIC TO FAT. There was an immediate outcry by the film representatives in Sydney. They protested against their business being selected for special taxation, but none of them touched upon the fact that extraordinary gross profits were being sent out of the country, i One and all agreed that the tax would be passed on to the public. "Summed up," said.the secretary of the Motion Picture Distributors' Association of Australia, "the special tax which Mr. Lang has succeeded in placing upon the film industry means that the 30,000,000 people who paid admission to picture theatres last year will, during the coming year, have to pay more." He added that it was (surprising the people's entertainment should be selected by Mr.' Lang for purposes of securing additional revenue. The motion picture industry in all its sections was willing to bear, and had always borne, a just proportion of taxation for ti.o Government of the country, but they resented the people's entertainment being selected as v special medium for what must be regarded as plenary taxation.

The film people intend to interview Mr. Lang on the matter, but they arc likely to obtain but little satisfaction. Mr. Lang had all sides of tho House supporting him last week, and there waa general public approval when the nieasure was announced. The film industry might be cutting off its nose to spite its face if it passes on the tax —in other words, Australia^ films might receive * uaub-netdccl fillip,