Dáil Éireann debate -
Tuesday, 7 Oct 2003

Vol. 571 No. 4

Adjournment Debate. - Tax Incentives.

Ms McManus

I welcome this opportunity to raise the need to retain the tax incentive for film-making contained in section 481. This support to the film industry is vital to the future of many hundreds of jobs and the livelihoods of many small businesses currently dependent on major film projects.

In County Wicklow, there is a long tradition of film-making. Direct jobs across the range of technical and creative activities have been developed, as well as the spin-off to local businesses which film-making brings. A film commission has been established in County Wicklow in recognition of the value the local authority puts on its economic importance to the county. The role played by Ardmore Studios as the country's largest film studio is evident. Over 24 major productions selected the county as a location. Not only did these companies spend money in the county, they also highlighted its tourist attractions. Tourist numbers to Avoca doubled after the making of the "Ballykissangel" television series.

Tax incentives play an essential part of attracting such business. All other EU countries provide these incentives. In the UK, there are four such schemes. Not only does section 481 attract business very successfully to Ireland. As well as supporting indigenous film-making, it also constitutes good value for money. An example is the film "King Arthur" currently being made – much of it in the Minister for Finance's home county, Kildare – which is employing 900 people for nine months. Since the investment liable for tax relief is capped, the maximum relief is €3.5 million. The amount of money being spent in the Irish economy adds up to €50 million alone. Between €8 million and €10 million is returned directly to the Exchequer by way of VAT, PRSI, PAYE etc. This is true value for money.

At a time when the Government, on a daily basis, is being found deficient in ensuring the good management of the public finances, it is impossible to understand why the Minister is targeting this tax incentive for abolition when it has proved itself time and again. The same Minister for Finance introduced a wasteful and unnecessary tax incentive scheme at the behest of a constituent who is building a private day care hospital.

Much play has been made by the Government – regrettably even by the Minister of State, Deputy Roche, who represents County Wicklow and should know better – that abuse of this scheme is the cause of its abolition. That is an erroneous argument. Clearly, the vetting procedures and the film community itself are capable of dealing with any abuse.

According to Screen Producers Ireland, the organisation representing the industry, the Irish film and TV drama industry employs 4,300 people. If a tax incentive for the industry is not available, it is estimated that 80% of production work may stop immediately, with the loss of 80% of the jobs overnight. However, if tax incentives were to continue, the organisation believes that, within ten years, the industry could employ up to 11,000 people directly and spend €500 million euro in Ireland. This industry is growing fast on a worldwide basis. The issue now is as to whether Ireland, particularly County Wicklow, will be able to keep up or will be left behind because of wrong-headed Government intransigence.

The film producer, Jim Sheridan, noted that Los Angeles holds the Irish film industry in high esteem. This has helped to bring an average of $136 million inward investment annually to Ireland. Ireland has become one of the top six preferred locations in the world for film production. A considerable talent and skills bank has grown up over the years. We have developed the essentials for a successful industry: a talent base, professional support, infrastructure and a good reputation. Students are coming out of our film schools well trained and ready to take up jobs in an industry that is growing and expanding in its potential. I ask the Government to think again before it is too late.

Film could be a key enabler for the development of an indigenous digital media industry. Other countries can see the potential, yet our Government is intent on blindly pursuing a policy that will damage rather than develop film-making. Far from withdrawing section 481, there is a strong argument for increasing the cap in order to attract more and larger productions. I urge the Minister to see the value of this incentive in fin ancial, employment, commercial and tourism terms before it is too late.

Minister of State at the Department of Finance (Mr. Parlon)

I thank Deputy McManus for raising this matter. She has articulated very well the importance of tourism and the film industry to this country, especially to County Wicklow.

As the House is probably aware, tax relief for the film industry was first introduced in 1984, under the business expansion scheme and has continued in various forms for the past 19 years. This makes it one of the longest running sector-specific tax reliefs in the economy and has involved an Exchequer contribution, in terms of tax forgone, of the order of some €265 million in the last ten years alone.

It should be noted that this relief has continued, over time, against a backdrop of the widening of the tax base and reduction of rates generally. The termination of this relief is part of a larger package to maintain our low income and corporation tax rates. As the Minister for Finance said in his Budget Statement last year, reliefs narrow the tax base; a widened tax base is the price that must be paid to keep tax rates low and this is a price worth paying. Therefore, all tax reliefs must be kept under review.

In that context the Minister for Finance announced that a number of reliefs across a range of sectors, including film relief, would not be extended beyond 31 December 2004. These reliefs include the urban renewal scheme, the town renewal scheme, the scheme of relief for the construction of multi-storey car parks, the rural renewal scheme, the living-over-the-shop scheme, the park and ride scheme, the student accommodation scheme and the relief for expenditure incurred on certain buildings used for third level educational purposes. In the Budget Statement and Finance Act 2003, the Minister for Finance also announced a termination date for the special capital allowances regime for hotels and holiday cottages, subject to transitional provisions which provided for the continued availability of the regime until 31 December 2004 for certain pipeline projects.

No one is arguing that these reliefs have not been of benefit. Special reliefs have played an important role in many areas and in the development of many business sectors. However, the key value in such reliefs is in kick-starting such developments, rather than in providing ongoing support on a permanent basis. While there may be a case for maintaining each of these reliefs, the case for broadening the tax base and keeping tax rates low is even stronger.

The Minister's attention has been drawn to the fact that many other countries, such as the UK, Canada and Australia, have tax incentives and other forms of State aid for film production. However, all of these countries have higher cor poration tax rates than our rate of 12.5%. If these countries adopted our approach of maintaining a low corporation tax rate as a means to encourage enterprise and stimulate employment, it is not likely they would also be in a position to retain a wide range of sectoral specific reliefs, such a tax incentives for film production over the long-term. In the Minister's view, having low tax rates and a plethora of reliefs simultaneously is not a viable long-term option. It is widely acknowledged that low tax rates have been a critical factor in our present high employment situation.

The Minister is aware of the views of many in the film sector that have been expressed, either directly by way of representations or indirectly through the media, with regard to the economic and social impacts of the termination of this relief in December 2004. The Minister for Arts, Sports and Tourism has recently forwarded to the Minister for Finance a copy of a study reviewing the relief that was commissioned jointly by his Department and the Irish Film Board. The Minister for Finance has asked officials from his Department to examine this study. However, as things stand. the position with regard to the 31 December 2004 termination date for this relief remains unchanged.