Czech Republic suffers from lack of tax incentives

In the earlier part of the decade, Eastern Europe functioned as a factory for big-budget pics as a series of glossy productions moved through high-end studios in Prague, Budapest and Romania. Producers took advantage of the beneficial exchange rate, experienced English-speaking crews and excellent facilities, gravitating to such countries over pricier locations in the U.S. and the U.K.

But now, competition for shoots is fierce, with incentive plans in many U.S. states, not to mention bottom-line-loving deals in New Zealand and Australia, and Western European countries offering more attractive packages for producers. Oh, and the dollar has rebounded against most foreign currencies.

So where does that leave the Eastern Europeans? Depends on which country you visit.

Five years ago, the Czech Republic hosted shoots for some 15 high-profile international productions, including “The Chronicles of Narnia: The Lion, the Witch and the Wardrobe,” while last year saw the release of 11 international features shot in the Czech Republic, including global action hit “Wanted” and German-backed World War I flying ace drama “The Red Baron.”

But in 2008 the wheels of industry ground to a halt: International features scheduled for release in 2009 that were shot in the Czech Republic number just two: Paramount’s “G.I. Joe: The Rise of Cobra” and German-French co-production “Henri IV.” And the only major Hollywood project filming in Prague now is Lucasfilm’s high-profile “Red Tails,” which has been prepping for lensing to start later this month.

“Business in Prague has cooled down,” admits Ludmila Claussova of the Czech Film Commission. “2008 was quite bad in terms of the foreign films shot here — perhaps the worst year in a long time.”

Czech producers and studio chiefs have long been urging the state to adopt a tax-incentive scheme to attract foreign shoots. In fact, a new law was being prepared by the Czech Ministry of Culture when the governemnt collapsed in late March, putting the bill’s fate in question.

Although a new interim government is likely to be formed soon, an agreement to bring forward parliamentary elections scheduled for 2010 to October 2009 could mean nothing will be done about the film bill (or its tax-incentive provisions) until fall at the earliest.

But recent signs that the two parliamentary camps — divided between liberals and conservatives — were actually working together could play in its favor. And though Culture Minister Vaclav Jehlicka lost his job when Prime Minister Mirek Topolanek’s shaky coaltion goverment collapsed, civil servants in the media and audiovisual department were continuing to work on the draft law.

“In the eyes of the two camps in parliament, this film law and the tax incentives are a small issue. It does not involve major changes to big issues like pensions or taxes. Perhaps there is room for agreement on this earlier,” Claussova observes.

She says the success of the Hungarian tax-incentive scheme (which offers a 20% tax shield with money paid through a third party) or the German plan (in which a producer gets public money via a state fund) both offer models that could work to revitalize the production slowdown in Prague.

Stillking Films co-founder Matthew Stillman is optimistic about the region in general: “It’s difficult to say whether Central-Eastern Europe is in a different position, because the industry has been in a bit of a flux over the last year through a combination of (the) writers strike, the potential actors strike and the recession. I cannot yet see a trend. The dollar has strengthened by around 30%-35% in respect (to) Europe, so you would expect more production here.”

And although Prague is experiencing challenging times, other budget locations in the region seem to be booming.

For example, Stillking expanded its presence to focus on a broader range of countries and was doing more shooting in places like Slovenia, Croatia, Italy, France and the U.K. And David Varod, head of Bulgaria’s Nu Boyana Film Studios says business is buoyant.

The studio has four feature films shooting at its facilities, including Peter Weir’s $30¬†million “The Way Back,” starring Colin Farrell and Ed Harris; and “Universal Soldier¬†3,” starring Jean-Claude Van Damme and Dolph Lundgren. Brett Ratner’s $50 million “Conan” is in pre-production.

Varod sees no sign of any contraction — rather expansion as the studios add facilities.

“We are closing (deals on) another four movies as well for the middle of the year, and by June we shall have another 4,000 square meters (43,000 square feet) of new soundstages ready. And we are starting the construction of six more stages, which will be operational by 2010,” Varod says.

In Hungary, which pioneered the tax-incentive scheme for local and international co-productions in 2004, foreign film work is bouncing back after a pause last year when European Union antitrust rules led to the suspension of the program.

The incentive was reinstated until 2013 with the blessing of Brussels after regulations stipulating “cultural eligibility tests” were put in place in order to qualify for the tax breaks. Hungarians can breathe a sigh of relief, as the plan had contributed to the steep rise in the number of co-productions shot in the country: Hungarian National Film Office figures show 11 co-productions in 2004, 13 in 2006, 25 in 2007 and 48 in 2008.

According to Csaba Papp of state film promotion body Magyar Filmunio, productions currently shooting in Hungary include John Madden’s “The Debt,” starring Helen Mirren and Tom Wilkinson; Italo project “Memories of Anne Frank” at Budapest’s Mafilm Studios; and Good Films’ comedy “The Great Ghost Rescue.”

And Hungary is ready to set out its table in Hollywood: The Hungarian Film Commission’s Los Angeles rep, Aniko Navai, is hosting a “Save in Hungary!” reception on the eve of the Locations Trade Show, which runs April 16-18 in Santa Monica, Calif.

“We’ll reintroduce our tax incentives, production facilities and film-friendly environment,” Navai says, adding, “It will provide a meet-and-greet opportunity for the visiting Hungarian producers and executives and the Hollywood filmmaking community.”

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