Written Answers. - Film Industry Incentives.

Seamus Brennan

Question:

140 Mr. S. Brennan asked the Minister for Finance the reason tax incentives for the film industry have been reduced; his views on whether this action has contributed to a new decline in the industry and that the spin-off effects are being felt in hotels, car hire companies, caterers, telecommunications, social welfare and the ESB; if his attention has been drawn to the loss to Ireland of various film proposals and film personnel as a direct result of the reduction in tax incentives; and if he will make a statement on the matter. [16612/96]

As I announced in my budget speech last January, the modifications made in the section 35 relief for investment in films were designed to improve the targeting of the relief and to make it more cost-efficient from the point of view of the Exchequer. The operation of the relief has been examined by an independent economic consultancy firm and this study estimated the annual benefit to the Exchequer at between £10.8 million and £13.5 million compared to an Exchequer cost of £19.4 million. This meant that there was a net cost to the Exchequer of between £5.9 million to £8.6 million. The study also found that a large part of the benefit of the relief accrued to the investors and the intermediaries rather than to the film company itself. Also, there was evidence of over-heating in the industry which manifested itself in the form of excessive wages being paid to film crews and to film personnel having to be brought in from abroad. For all these reasons it was necessary to amend the section 35 relief and focus it better. The changes made to the section 35 relief in the 1966 budget and Finance Act, therefore, targeted the relief at smaller film productions which would tend to have a greater level of Irish employment than the large-scale productions.

My Department is not yet aware of any significant adverse effect on hotels or the other areas mentioned by the Deputy as a result of the changes in section 35 relief. While assessments of the 1996 tourism year are obviously not yet to hand, there is every indication that 1996 will be another good tourist year, as reflected for example in the high accommodation levels achieved by hotels in the Dublin area. As the Deputy will know, the Irish economy is having another good year and tourism growth is contributing to this.

The question of any loss to Ireland of various film proposals is a matter for the Minister for Arts, Culture and the Gaeltacht, who has the responsibility for certifying films for the section 35 relief.