FILM TAX IMPASSE

Southland Times, Issue 21195, 23 September 1930, Page 5

FILM TAX IMPASSE

FAR REACHING EFFECTS NEW ZEALAND THEATRES JEOPARDIZED PRESENT DEADLOCK OUTLINED “Interviewed this morning, > Sir Victor Wilson, president of the Film Distributors’ Association, said it was quite correct that he had rebeived a letter from the actingPrime Minister (the Hon. E. A. Ransom) stating that the Government was not prepared to re-open investigation or have an inquiry into the position. Sir Victor said that he hoped to make a complete statement of the whole case within the next day or so,' as he believed that not only the trade but also the public were entitled to ! know the whole of the circumstances of the present lock-out in the film industry.” —Press Association- message; September 18, 1930. It, is apparent that the public referred to, however, possesses but a very vague and fragmentary knowledge of what is behind the threat made by the Motion Picture distributors to withdraw from New Zealand and of the consequences likely to accrue if such threat be carried to an extreme issue. With a view to arriving at the actual state of affairs at present pertaining and, again, likely to eventuate in the future, on Saturday a Times reporter discussed, with interested parties, the impasse which has arisen in Wellington and to elucidate the whole position, the following relavent facts, gleaned from such authoritative sources, * can be set out for the information of the public. Motion pictures have their origin in the studios of the producers. That' fact is clearly understood. The producers hand over the finished product to the distributors who, in turn, rent or hire the films to the theatre owners for exhibition. The distributors in New Zealand are mainly Branches of the producing houses, so that, as far as this Dominion is concerned, the' business is divided into two sections: (1) The producer-distributor (the wholesaler of ordinary commerce) and (2) The exhibitoi (the retailer). At the moment the exhibitors, i.e., the theatre-owning interests, are not affected by the threatened boycott or lock-out. Their profits are easily assessable and they, are subject to full income tax and other charges, while they are bearing their full share of the country’s taxation.

Box-Office Receipts the Guide. In ordinary commerce it is a simple matter to determine the value of any article or commodity. It can be purchased wholesale at a fixed figure and sold at a higher price, the difference between the two providing the basis on which the amount of actual profit, and, subsequently, the amount payable in income tax, can be arrived at. With motion pictures, the wholesale value (or the figure received by the producer-distributor) must depend on the box-office value of the particular picture. That is to say, the picture everyone wants to see is undoubtedly of a much greater value than a poor production, or “dud," and that notwithstanding the amount or length of actual film used, the time occupied in shooting, salaries paid, etc., may be the same in each case. A picture must, therefore,- be shown to the public before its success or failure can be gauged. In brief, its value can be assessed only after it has been exhibited.

For this reason, taxation of the profits of the producer-distributor has always been a difficult matter. The practice, for many years, was for the New Zealand branches to remit to Home Office a fixed percentage of their gross earnings as the manufacturer’s charge, leaving the balance in this country for the branches’ local expenses. The percentage left behind was usually barely sufficient to cover the actual cost of running such branches, with the result that the income tax payable on the local operations of the producer-distributors was very small. Indeed, the amount was so small, having regard to the volume of overseas remittances, that, a year or two ago, the Government took the matter in hand and announced that it intended claiming 124 per cent, of the gross revenue as income tax. In the opinion of the pro-ducer-distributors, this was, of course, too drastic since no business, they contended, could be expected to stand a tax of 121 per cent, on its turnover. The matter was adjusted by fixing 121 per cent, of the gross revenue as the taxable income of each company, and, on this basis, tax has been paid.-

New Taxation Proposals. ' Now, considerable discussion is taking place concerning the new taxation proposals. After allowing deductions for other taxation, duty, cost of handling and so on, the Government propose to take 25 per. cent, of the surplus monies remitted from this country. Such percentage is estimated by it to produce £30,000. In Australia and New Zealand, the pro-ducer-distributors are controlled by an organization known as the Motion Picture Distributors’ Association, of which Sir Victor Wilson is president with his headquarters at Sydney. Sir Victor has come to this country and submitted audited figures to the Government to show that the new tax, instead of realizing £30,000, would, bn the basis disclosed by the last six months’ trading, produce at least, £79,000 or, probably, £98,000. He is prepared to find the £30,000 budgetted for but objects to a percentage which may cause the pro-ducers-distributors to’ pay three or four times the amount the Government seeks to

An Impasse Reached. To emphasize the serious view the pro-ducer-distributors take of this surcharge on their business, Sir Victor, acting under instructions from America, has notified all distributors to cease selling in New Zealand, with the result that, at the present time, it is not possible for any new contracts to be made, with any of the principal distributing firms; Current contracts, which, in most cases, cover supplies for a few more months must, lof course, be carried out, while, again,lsome of the smaller and independent distributing houses .outside the Motion Picture Distributors’ Association are still doing business.

At present an impasse seems to have been reached, though it is quite possible that, within a- short time, some form of compromise will be arrived at. Now, however, both parties appear adamant. The Government is determined to demand its “pound]of flesh” (as the opponents so characterize! the new film tax), while the distributors refuse to be bled. It is interesting to note the pertinent comment of the principals in the contretemps. Sir Victor Wilson says:

“The companies are anxious to trade and continue trading with New Zealand, but the Government has decided on legislation jwhich prevents such trading.” The aiting-Prime Minister, the Hon. E. A. Ransbm, states.: “If the tax brings in more than is anticipated by the Government it can only ihean that the net rentals, after deducting administrative expenses and the’ aniount on which income tax is payable, are greater than was estimated. If the rentals are greater it simply means that tfie surplus remaining for the film companies is greater than if the yield from the tax was less. Thus renters should be the last to complain of a tax producing more than estimated.” Serious Position May Arise. At the moment, the theatres-—or exhibitors—aje not greatly affected. Supplies are still, available to them under the current coiitracts and will be so until the end of the year. On the other hand, how-

ever, it must be conceded that, if the deadlock continues and no basis of settlement is . found, the position will be serious in many ways for investments in theatre properties will suffer considerably, the ranks of the unemployed will be materially added to] revenue from the amusement tax will show a very decided drop (the bulk of this form of taxation being collected through the medium of picture theatres) there will be no income tax payable by theatre owners and so on. Accordingly, it can be realized that the dispute tends to involve far reaching effects not perhaps discernible at first glance. Similar Impasse With France. .Only once before, in motion picture history, has such ,4n impasse arisen. The distributors’ organization in America gave instructions, last year, to their representatives in France to cease selling, and, for a period of six months, a deadlock ensued. The similarity between the present New .Zealand situation and that in France last year is striking. During the early part of 1929 the Chambre Syndicate in Paris proposed to the Cinema Control Commission a change in the regulations of the French Quota system, whereby only four foreign pictures would be permitted to enter France for every French picture produced. This would have abolished the prevailing system under which seven foreign pietdres were imported for every picture made locally. In addition it was proposed to reduce the 60 per cent, free importation to 30 per cent. Under the proposed dhangc American distributors would have been forced to operate in the French market at a loss. Rather than do that, they ceased selling in March. For a period the French m’arket starved. Available local product, as well as pictures from England and Germany, not only failed to supply the demand but could not maintain figures at the box-office. After many heated conferences between the American and French industries an ■ agreement was reached on September 19, 1929, restoring status quo for at least a year, and providing that the Cinema Control Commission should recommend a more equitable quota system of protection for the French industry. ■