ROME — After a decade in the doldrums, Italy’s film industry is in the midst of a revitalization, thanks largely to new tax breaks for film production that are reshaping the economics of the biz, and luring local equity investors into the sector.
The incentives — which give local producers a 20% tax break, outside investors a 40% tax shelter and foreign productions a 25% tax credit — have been in place since 2009. But until February of 2011, when they were renewed for three years, some local industryites considered them a risky proposition, due to a combination of mistrust toward Italo red tape and fear that the fiscal perks would suddenly be pulled.
No longer. The incentives, replacing a dangerous dependency on government subsidies, have initiated a new cycle, and the numbers are encouraging.
“At the start of the 1990s, our cinema was dead abroad, and at home we were below a 12% market share: we had disappeared,” producer Riccardo Tozzi said at Cannes. “Today our market share is more than 40%. And tax credits and tax shelters have become our indispensable tools,” added Tozzi, who heads Cattleya, in which U holds a stake, and also presides over Italo motion picture ANICA.
Compared with other European countries in which systems of incentives have matured, Italy is late in weaning itself off a sometimes parasitic straight subsidies system.
But, though the full impact of the new incentives has yet to be realized, a significant systemic shift seems to be under way — the most important being the birth of equity financing within the local industry.
“Investing in movies is a big economic opportunity now, especially for those who are outsiders to this world,” said Nicola Borrelli, director general of Italy’s national film department, at a recent Turin confab titled “New Business? Show Business” that was packed with Italian execs from companies outside the movie industry.
Private investors external to the Italian film industry have so far filed paperwork for more than €23 million ($33.6 million) in investments toward local film productions, Borrelli told Variety.
The Turin event marked Italy’s first attempt to entice a roomful of suits into buying equity stakes of upcoming film projects, pitched by prominent producers including Domenico Procacci (“Habemus Papam”) and Lionello Cerri (“Days and Clouds”).
Film Investments Piemonte (FIP), a revolving fund affiliated with the Turin and Piedmont Film Commission, organized the event, while the Turin and Piedmont commission, which is affiliated with FIP, will act as liaison, and also basically as a guarantor, for outside investors on Italo pics shooting in the region.
The film used to illustrate Italy’s new model for more ambitious, bigger-budget pics with international ambitions to investors is Paolo Sorrentino’s Sean Penn-starrer “This Must Be the Place,” which launched in Cannes.
Nicola Corigliano, media desk co-ordinator for Mediocredito bank, told execs in Turin that, in an unprecedented move for Italy, the bank decided to invest $3.65 million in “Place,” which translated to a €1 million tax writeoff.
Now Mediocredito, a unit of Intesa San Paolo, a top Italo lender, expects to break even as soon as a U.S. sale of “Place” is
inked. The bank will subsequently tap into a share of likely profits from the $41 million English-language pic, co-produced by Indigo, Lucky Red, Medusa and Gaul’s ARP and the Irish Film Board. Pic, which Medusa will release in Italy in October, has been widely presold by Pathe.
Interestingly, though, “Place” producer Nicola Giuliano noted in Cannes that, on top of Italy’s incentives combined with Ireland’s tax credits, the key to mounting Sorrentino’s pic was the generous incentives offered by Michigan, which hosted its U.S. shoot.
“In Detroit, for every dollar spend, you get 40¢ back. In the end, that was what really clinched it for us,” he said.