TAXATION OF FILMS.

New Zealand Herald, Volume LXVII, Issue 20721, 14 November 1930, Page 12

TAXATION OF FILMS.

TERMS OV SETTLEMENT. EXCHANGES BUSY AGAIN. I BASIS FOR THE NEW TAX. REVENUE OF THE RENTERS. Ifilrn distributing companies operating fn New Zealand will have a gross turnover this year of approximately £450,000, According to a statement mado yesterday by Mr/Henry Hay ward, in reviewing the settlement of tlio dispute over taxation between the fdrn companies and tho Government. This meant that motion pictures id New Zealand earned for the companies renting them to the exhibitors approximately £9OOO a week. "It 13 on this sum, estimated at '£450,000, that the film companies will have to pay the new tax," Mr. Hayward said. "The cost of distribntion and the amount on which income tax is charged are deducted from the gross turnover and on the balance a tax of 25 per cent, is payable. The film distributors have accepted the Government's terms, and have agreed to pay the disputed tax, accepting as a concession the remission of tho tax of Id a foot payable on imported film. However, an inquiry is to be held, probably early in tho new year, to determine whether the present mode of taxation is justified." "Spot" Booking Resumed. of film distributing companies, Which have been comparatively idle for months, were exceptionally busy yesterday, Mr, Hayward said. With the decision of tho Government to impose the iicw tax the renters had decided to ceaso business as a protest, and while negotiations were proceeding between their representatives and the Government they confined their activities to fulfilling contracts ;which had not expired. In tho past a considerable amount of film hiring had always been done on tho principle of "spot" booking—buying pictures as they becamo Available—and while tho dispute lasted this was discontinued. However, now that an agreement had been reached, pictures would again bo availablo for "spot" booking, and it was expected that new contracts for year would be made soon. Reviewing tho history of film taxation !n the Dominion, Mr. Hayward said that two years ago tho Government decided that the) film distributors were in a measure escaping taxation. American renters conducted their "business throngh New Zealand companies, financed largely by American capital, and frequently their charges for film'to the . subsidiary companies in the Dominion were in excess of the sum which tho film could earn. Thus, although a film might bo quite successful, there would be a book-keeping loss on its screening in the Dominion. To overcome this, tho Government, instead of charging incomo tax on profits disclosed by balance-sheets, decided that 32J, per cent, of tho gross turnover should be chargeable with incomo tax. When it •W3S decidod this year to impose extra taxation, the Government decided to place a fax of 25 per cent, on the gross turnover, after the deduction of the cost of distribu. tion and,,the amount on which income tax is charged. The tax of 25 per cent.*was really cliargeablo on about 75 per cent, of the gross turnover. Objections of Renters, " The lenters objected to this method ns being a system of taxation invontcd specially for their business, and, as far as they know, not adopted in any other part of. tho. world/' Mr. Hayward said. •" When tber Government remained firm in its intention to impose tho tax they decided to cease business after tho expiry of existing contracts. This decision was responsible for consternation in the industry, which was already suffering from the results of the talking- picture, revolution, with tho treJirendous cost of sound equipment for theatres./ The exhibitors realised that if the ho|d-up continued it would mean ruin to their business, as, without American pictures, thero would be insufficient film- Some of tho exhibitors favoured tho running of a cooperative exchange, hoping to buy independent film from tho United States, which, with English supplies and pictures from tho Continent, would enable them to make some showing, but, genorally speaking, tho principal exhibitors saw no hope in this direction. " Eventually tho Government arranged a conference between its representatives and representatives of the film distributors and exhibitors. The distributors, under tho leadership of Sir Victor Wilson, put forward a countor-proposal of an ad ;valorem duty, the Government to put a duty of 25 per cent, on all film imported from America, such film to bo valued at 8d a foot. However, the Government considered that this tax would have yielded insufficient revenue, and, furthermore, the exhibitors were not favourable to a footage tax in any form, as some of them contended that it could bo passed on by tho distributors. Offer of Concessions. . " During the discussions the Government intimated that it was prepared to remit the film duty of Id a foot and also to hold an inquiry into tho working of the new tax. The. renters rejected this toncessioh and the conference ended without, anything tangible having been accomplished, although negotiations between tho parties continued. " Meanwhile, tho exhibitors wore suffering considerable inconvenience and loss. Contracts previously made wero honoured by the distributors, but ' spot' booking . mid the soiling of now film ceased altogether. A few theatres had to close, (several reduced tho number of screenings and at others pictures had to bo screened ' for longer seasons than usual in order to spin out availablo supplies. Although 1 business is hnrdly good anywhere at pres- ' cut, tho taxation dispute certainly did not smprovo it for the proprietors of picture theatres. " Now the Government' 3 terms have been accepted. Hummed up, tlie Government has maintained tho principle of its tax; the film renters bavo gained some financial concession; and tho exhibitors, through the removal of tho footage duty, liavo had their position improved, as Now Zealand now has frco trade in tho importation of film." 1 t