Long road to tax incentives for Czech industry
It has been a long and winding road getting tax incentives, but for the Czech film industry, after a decade of lobbying, it’s about to become a reality. Putting the Czech Republic on the same footing as other European countries that offer incentives to pull in overseas production, a bill that passed late last year is undergoing a European Union approval process. No serious setbacks are expected, and by the time the Berlinale wraps, producers bringing projects to the Czech Republic should qualify for 20% refunds on their local expenses.
That will do much to bring work back home for Czech crews including technicians and set artists who have been forced in recent years to seek jobs in other countries offering incentives, such as Hungary, Poland and Germany or in lower-cost locations like Bulgaria and Romania.
Key moments that brought the Czechs to this point:
Early anxieties that Prague’s position as a budget location could be faltering were flagged when the Czech Film Committee was set up with the support of the Czech Assn. of Film Producers and tasked with lobbying for better legal, fiscal and practical measures to maintain the local industry’s competitive edge.
Fears that a weak dollar and increasingly strong local currency, the koruna, could undermine its attractiveness were realized when foreign shoots slumped 70%, bringing overall production down 50% from a high in the 1990s. The approval in neighboring Hungary of a tax incentive law brought competition directly to the Czech Republic’s doorstep. Calls for politicians to back a similar law for the country went unheeded, despite the establishment that year of a film commission to champion location shooting.
An early version of a bill backed by the film industry was killed on the floor of the Czech Parliament at the last minute when two MPs suddenly disappeared and didn’t vote. It was widely believed that they had been offered deals by TV Nova, which would have had to contribute a percentage of ad revenues to fund Czech film if the law had passed. The action dashed hopes for any early relief to an industry increasingly under pressure from a local currency worth 25% more against the dollar than two years before. That’s when supporters of Czech film funding decided on a different tack that would not tax TV, exhibitors and distributors.
Czech filmmakers and politicians hammered out a stopgap deal that promised more public funding for domestic productions while a fresh law on cine-matography was put before Parliament. By the end of the year, President Vaclav Klaus had been persuaded to sign off on a law guaranteeing $24 million of state funding for local films over a three-year period.
At what had now become a traditional huddle between producers and politicians at the Karlovy Vary Intl. Film Festival, a new system of production incentives inched a little closer to reality after two of the country’s top politicians agreed that something must be done about the collapse in foreign shoots in the country — down from $250 million to just $35 million over the previous five years.
Former Prime Minister — and head of right-of-center party ODS — Mirek Topolanek and Vitezslav Jandak, shadow minister of culture for the Social Democratic Party (CSSD), said they felt there was now the need for incentives in a situation where other European countries had systems in place that put the Czech film industry at an unfair disadvantage.
Close collaboration between the Czech Film Commission — which produced expert reports on the economic advantages of film production incentives schemes — and officials at the Ministry of Culture, finally brought about a bill that passed muster in Parliament. It provides for $23 million in tax incentives annually for foreign productions that shoot in the Czech Republic. It’s also significant that it was only after the collapse of the Czech government in the autumn of 2009 that the bill passed — approved by a caretaker administration made up of nonpoliticians and businesspeople.
The law is sent to the European Union for approval.