Hard times force tax rethink in region

Weak dollar, competish creates tough environment for Luxembourg

Luxembourg, the country that spearheaded the use of tax breaks to build up its film industry in the late 1980s, is taking a long, hard look at the pioneering program as its 10-year term nears its end.

“It expires in 2008 and while there is no question that it will not be renewed we are looking at ways it can be reshaped and refocused,” says Luxembourg Film Fund chief Guy Daleiden.

The weak dollar, increased competition from Eastern and Central Europe countries, and the introduction of tax incentives in neighboring Belgium and France have created a tougher environment for Luxembourg’s 20-year-old film industry.

“The situation has definitely got a lot harder. It’s not disastrous but our producers have to put much greater effort into getting productions off the ground,” says Daleiden. “The new tax shelters in Belgium and France have definitely had an impact. It’s clear that we need to react, so we have started consultations with the local industry.”

Production figures for 2004 have yet to be released, but Daleiden says they are broadly in line with 2003. Luxembourg gave $11 million in tax breaks on $36.2 million in production costs in the territory that year.

The figures were down slightly on 2002 and way below the record year of 2001, when $20.2 million in tax breaks were granted on $65 million in local production.

“You have to be careful about reading too much into the year-to-year figures,” notes Daleiden. “It only takes one film with a budget of $25 million to completely change the picture.”

Luxembourg producers admit times are tough but say long-term co-production relationships, the country’s position at the heart of Western Europe, and a wealth of locations and quality studio facilities have stood them in good stead.

“Who isn’t suffering from the weak dollar?” asks producer Tom Reeve, co-head of production house the Carousel Picture Co. with Romain Schroeder. “We’re seeing less of the middle(-range) business. It doesn’t make sense for a U.S. TV company to come and shoot here unless there is a European element in the script.

“We’re getting a lot more enquiries from Canada, however. It’s one of the few countries with which Luxembourg has a co-production treaty and they too have been hit hard by the dollar’s weakness.”

Dommeldange-based Carousel, which owns and manages a huge two-stage studio facility, celebrates its 10th anniversary this year.

“Fifteen years ago, we were lucky if you could find two drivers, a location manager and a cook locally. Now we have local d.p.s, sound mixers and production designers,” says Reeve.

The company has just shot horror fantasy “Minotaur,” Jonathan English’s retelling of the ancient Greek myth, starring Rutger Hauer, Tony Todd and Tom Hardy.

Its previous co-production, Mary McGukian’s “Rag Tale,” a romance set against the backdrop of a U.K. tabloid newspaper in the lead up to the U.S. elections last year, co-starring Rupert Graves and Jennifer Jason Leigh, will screen at the Cannes Market.

Productions at Delux, Luxembourg’s biggest and oldest production house and studio, are on hold due to the ill health of its hands-on chief, Jimmy De Brabant.

Last year, the company co-produced Paul Tickell’s art-theft thriller “Tempesta” and Richard Claus’ children’s fantasy “Thief Lord.” Both the Venice-based pics were partially shot on Delux’s huge set of the lagoon city originally built for “Secret Passage.”

Arthouse stalwart Samsa Films, meanwhile, has a full production calendar. It is currently shooting Pierre-Paul Renders’ “Comme tout le monde,” a Frenchified “Truman Show” co-produced with longtime collaborators Belgian Entre Chien et Loup and French Rezo Films.

“We’ve built up a good reputation over the years and have strong relationships with producers in neighboring Belgium and France,” says company spokeswoman Lelia De Luca. “This network keeps us working even when conditions are tough.”

Recent co-productions include Robinson Savary’s romance “Bye-Bye Blackbird,” set in a London circus at the turn of the century.

U.K. producer Christine Alderson, of Newcastle-based Ipso Facto, is totally sold on shooting in Luxembourg. “They’ve got wonderful crews and technicians. The quality of the work is fantastic,” she says, adding with a laugh, “Their gaffers and grips talk about art and films. Where else would you get that?”