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Tax Film Finance Builds Around the World

San Sebastian panel analyzes credits/rebates around the world

SAN SEBASTIAN – Mexico looks set to institute new quality controls on the now dozens of its films which draw down tax-break finance, Jorge Sánchez, director of the IMCINE Mexican Film Institute revealed Tuesday in San Sebastian.

Announcement was made at a round table: Tax incentives in the Co-production Structure: Canada, Brazil, Mexico, Czech Republic and Dominican Republic.

The move is not only, as Sánchez argued, to prevent investors setting aside tax credits for films which never get made, but also, in a bigger picture, to protect the good name of a system now vital to for vibrant Mexican movie industry.

Mexico produced 126 movies in 2013, its biggest result since 1959. The average film budget climbed to 22.2 million pesos ($1.7 million) as private finance – which financed 41 films last year – flows into the sector, attracted by 10% fiscal credits capped at $1.4 million per tax payer.

$55 million for 2014, Efecine tax credit investment, used on pics such as “Paradise” (pictured), is 37.5% up on 2013’s ceiling. Mexico is still honing its system. For the first time, $5 million in tax coin this year targets distribution, Sanchez said in San Sebastian. “Distribution and exhibition are our Achilles Heels,” he opined.

Sanchez called “especially interesting” an industry proposal for a commission of industry reps be put in place to study projects, especially their screenplays, which plan to tap tax incentives. The commission will “pre-certify” approved projects. He said he hoped the new scheme could be in place by the end of the year.

Over much of the world, new tax money is oiling movie production. Completely in place from 2012, 25% transferable tax credits, which can be channeled through service companies, have boosted production in the Dominican Republic from 64 features between 1963 and 2011 and 43 movies produced over just 2011-14, said EGEDA member Angel Luis Arambilet.

The Czech Republic introduced tax rebates in 2010, per the Czech Film Center’s Marketa Santrochova. Required minimum spend in the Czech Republic is around €550,000 ($722,700). Projects have to pass cultural tests. Total state authorized movie tax rebates, levied at 20% of local spend, rose from an average annual €18 million ($23.6 million) to about €28 million ($36.8 million) in 2014.

In Canada, tax financing, put through via 16% credits on local labor, works as a well-oiled machine, said Carole Vivier, at Manitoba Film & Music. U.S. banks discount tax finance; federal incentives exist alongside province-based systems.

Tax incentives faces challenges, however. In some countries – Brazil – adjudications are made just once a year. Brazilian producers now rely far more on other finance drivers: New TV regs, from March 2012, obliging pay TV channels in Brazil –and there are 110 of them, Rangel said – to air at least 3.5 hours of local content in primetime TV every week.; a 2014 $450 million direct incentive funding package, channeled via Ancine, for both film and TV.

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