Taxing times for biz

Dutch have high hopes for new tax scheme

Holland’s 7-year-old tax incentive has been pronounced dead so many times, its last-minute resuscitation has almost become an annual event.

Although the 2004 incarnation of the program survived bureaucratic dithering, a cadre of ministers and government officials said that it should not be renewed in 2005.

Once again, the film industry went on the offensive, marshalling parliamentarians to override the ministerial and bureaucratic objections. The initiative survived and is expected to get European Commission clearance by mid-May. Some three to four films are said to be waiting in the wings, including a project on the late Dutch pop entertainer and artist Herman Brood.

For foreign producers, the Dutch program was once a boon. It helped churn out some 50 films, but most were put in motion between 2000 and 2003. Among those pics are Joeren Krabbe’s “Discovery of Heaven,” Pieter Kramer’s “Yes Nurse, No Nurse,” Johan Nijenhuis’ “Full Moon” and Michael Apted’s “Enigma.”

The program is credited with pushing Dutch films’ share of the local box office to its highest in a decade, from a meager 0.6% in 1994 to 13% in 2004.

Now, the financial sweetener has turned bitter for filmers inside and outside of Holland. “Essentially, the tax scheme has an image problem,” says Hugo Klaassen, interim managing director of Fine, a company that helps put producers and investors together. “Even the filmmakers aren’t sure whether the scheme is back on or off again.”

Lack of experience on the part of the financiers and producers at the local level was also a problem, says Robbert Aarts, co-CEO of Fintage House, which was involved in three productions under the initiative, financed in conjunction with the bank Mees Pierson.

Carolien Croon, director of the Netherlands Assn. of Feature Film Producers, says the newest form of the tax break, being readied for 2006, will be simplified and eliminate some of the worst problems, one being a requirement that 75%-80% of the funding be in place before a project qualifies for the program. “By the time most producers have that much in place, they can find the rest and don’t have to go through the tax scheme.”

Croon, along with Klaassen, is working closely with the ministries of culture and finance to address some of the worst problems of the initiative. “We believe we can get that number down to around 55%-60% of the funding,” she says.

Another wrinkle in the current plan, and one that affects foreign producers the most, is a requirement that 50% of the production budget be spent in Holland. “There needs to be a system of checks and balances, but as it stands, it’s unattractive to international co-producers,” says Klaassen.

In the new tax initiative, which will run into 2007, the regulations, says Croon, will hopefully reflect the fact the coin used to prop up the program comes from Euro taxpayers and should be used to benefit the Euro industry. An initiative in which 50% of the venture capital, instead of the production budget, must be spent in Holland is also being discussed.

The plan agreed on will probably go to the EC some time in the next few months for review and will then be voted on by the Dutch Parliament in the latter part of the year.

Currently, the EC is conducting a massive study of the various state support programs concerning the film and TV industries, and is expected to come out with new ones in 2007 designed to help level the playing field.