Vol. 488 No. 5
6 Mr. M. Higgins asked the Minister for Arts, Heritage, Gaeltacht and the Islands if she has sought the retention of section 35 tax relief for films for a period longer than three years; and whether she sought increasing the 80 per cent of investment allowable to 100 per cent. [6728/98]
Decisions in relation to the further extension of section 481 of the Taxes Consolidation Act, 1997, ‘formerly section 35 of the Finance Act, 1987, as amended', beyond 1999 will be taken in the context of decisions relating to the 1999 budget.
In view of the need for strategic decisions to be taken later this year, I am establishing an industry think tank to conduct an objective evaluation of existing schemes and incentives which will be fully informed by the views and depth of experience of our industry professionals and to formulate a strategic plan for the future of the film industry for my consideration.
I have stated publicly that I believe that a longer term strategy is now required, and that we need to look to a timescale of from five to ten years, and this will be reflected in the terms of reference of the think tank.
As regards the question of restoring the level of tax relief from 80 per cent to 100 per cent, the decision to reduce the level of tax relief to 80 per cent was taken by a Government of which Deputy Higgins was a member, following an extensive review of the film relief by an independent consultant. That decision was based on the recommendations made in the INDECON report.
This is an issue which will clearly fall to be considered by the think tank and I look forward to receiving its views in due course.
I am grateful for the Minister's reply. I accept I was a member of the Government which commissioned the INDECON report, on foot of which the relief was negotiated for a period of three years. She is also correct in stating that on the basis of an INDECON proposal the relief was reduced from 100 per cent to 80 per cent. However, I am equally correct in stating that during that time she unequivocally stated in the House that she favoured the relief being at 100 per cent.
The Minister stated that the think tank will examine the needs of the industry for the next five to ten years. IBEC has already put into print its recommendation that the 80 per cent rate should be increased to 100 per cent and that the period of time should be extended beyond three years. It suggested that it should be coterminous with other related types of relief. My question is simple. Was a recommendation in line with IBEC's proposal made to the Minister for Finance, Deputy McCreevy, for inclusion in this year's Finance Bill or will it be made for the l999 budget? If that is the case, we have already lost one year.
I am sure Deputy Higgins will understand the significance of my reference to l999. That is when section 35 will have to be reviewed. It is in that context I referred to the l999 budget. Obviously, the Government gives consideration each year to all such issues in the context of the budget and the Finance Bill. The current indications are that there is a steady increase in the level of film production in Ireland. As the Deputy correctly stated, I have contended that we should examine the question of a 100 per cent tax relief, but I do not want to pre-empt any decisions that are likely to be taken by the think tank. The objective of setting up such an expert body is to get the views of those directly involved at all levels of the industry. The Deputy is correct in stating that we should examine every proposal.
Some would contend that circumstances do not warrant change or that such change would have a negative impact as an increased influx of purely tax driven international productions with little or no cultural content could crowd out indigenous producers. While such productions will always form a welcome element of our participation in what is an international industry, our core objective at all times is to ensure that we have a strong indigenous based production system. All those issues must be examined by the think tank in the context of the next five to ten years. When I was in Opposition we referred to this matter many times and I know the Deputy will agree that education and other long-term issues are important. The think tank will deal with those matters.
I welcome the Minister's conversion to my emphasis on the indigenous sector. When I was in Government and she was in Opposition she criticised me for neglecting the loss of revenue from the large budget tax induced films. Was a study carried out post the INDECON report on the effects of the reduction of the relief from 100 per cent to 80 per cent? I merely ask this question to assist the Minister in her efforts to devise a five to ten year plan. Is the steady increase to which she referred in gross spend or in the number of projects?
I must correct the Deputy, because I have not been on the road to Damascus yet. I have my views on the rate of relief which I can put to the various fora. The think tank will consider this matter and it may agree with the 100 per cent rate, but I will not pre-empt its views. Is the Deputy asking about the impact of the reduction of the relief from 100 per cent to 80 per cent?
What impact would it have on foreign and domestic investment in particular?
Following the reduction of tax relief from 100 per cent to 80 per cent in l996, the value of projects and the Irish expenditure content of films certified dropped substantially on previous years. This was obviously a cause for concern. Figures available for l997 indicate, however, that this downturn has been reversed and consequently the case for further tax expenditure at this point is not sustainable. Those are the views that have been put forward, but the matter can be examined in full by the think tank.
Those are the views of the Department of Finance.
