Stuck On The Movies

By Global Tax Weekly

This week there is a flurry of announcements of new or enhanced tax breaks for movie production, notably in China and California, which already had such incentives, and in independent Scotland, which didn’t, since it hasn’t existed since 1707, and probably never will again, although the UK does have such incentives. In fact, almost all countries, and sub-countries such as US States, have media production incentives, so one has to ask why? Even in the European Union such incentives are permitted, while many other types of tax break are frowned on or banned outright, although it’s true that the Commission normally insists on a “cultural content” test, i.e. your movie must have something Lithuanian about it, if you are shooting in Lithuania. And therein perhaps lies the explanation for the prevalence of such douceurs: they are part of nationalism, which is still a popular sport even while increasing swathes of life become globalized. You can be sure that the French will not pay you to make a movie in English, or the Russians a movie in French. Among the English-speaking nations (an increasing number) that issue doesn’t arise, although in China, where there is a booming market for movies in English, the tax breaks are presumably limited to Chinese language productions. There is also a considerable marketing aspect: New Zealand has undoubtedly benefited in spades from its hosting of the Hobbit movies, among others. Logically, then, it is short-sighted for China to limit its support to Chinese-language productions: spaghetti westerns were in English and gave lots of free publicity to Italy (the EU wouldn’t allow tax breaks for them of course, not that either the EU or film tax credits existed at that time). The Chinese should definitely allow Clint Eastwood or Gerard Depardieu (who probably speaks good Russian by now) to make thrillers in foreign languages on the Great Wall; but the nationality card trumps all other considerations. Don’t expect James Bond to land his Aston Martin in Tiananmen Square anytime soon.

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