Backing a film can seem like a glamorous way to invest money, especially if the end product succeeds in wooing international audiences to cinema seats and ringing up awards come Oscar night.
Investors in the silver screen can benefit from more than just free tickets to the film's premiere: qualifying films come with the added attraction of a tax break.
In 1995, concerns that the relief was too attractive to taxpayers led to a reduction in the amount of the investment that could be written off to 80 per cent. So the tax saving on an investment of €10,000 is €3,360, with the other €6,640 at risk.
Now Film Makers Ireland, a body representing 200 independent film and television producers, and other industry interests are lobbying the Government to restore the relief back up to 100 per cent.
Production company World 2000 has made representations to the Minister for Enterprise, Trade and Employment, Ms Harney, and the Minister for Arts, Sport and Tourism, Mr John O'Donoghue, in advance of the next Budget, including a cost-benefit analysis of restoring the full relief.
The industry is also calling for an increase in the restrictive cap on investment under the relief scheme from €10.48 million to €21 million and an extension of the relief to 2010. The scheme is currently due to expire in 2005.
"Bigger producers want an increase in the restrictive cap so they can get bigger budgets for their films and smaller companies want 100 per cent tax relief, because that's what they're up against in the UK," explains Ms Tania Banotti, director of Film Makers Ireland.
The Revenue-aided film industry here has been a victim of its own success, she says: European countries such as Luxembourg, Germany and the UK have all followed Ireland's initiative and introduced full tax relief for film investment, luring Hollywood studios away from Irish shores.
The fall in the top rate of tax and the drop in relief to 80 per cent have made film finance less attractive for investors, according to Ms Banotti. Mr Martin Phelan, head of the tax department at William Fry solicitors, agrees.
"When Section 35, as it was called then, first started, you could get a reasonable return for your investment.
"Now the investor doesn't get a reasonable return for their investment, in my opinion," Mr Phelan says.
Like the business expansion scheme, individuals can invest from between €250 and €31,750 in a qualifying film under the relief, which was first introduced in 1987 as Section 35 relief and renamed Section 481 in 1997. Films part-financed under the incentive include Reign of Fire, Braveheart, About Adam, Angela's Ashes and Michael Collins.
Since 1995, tax relief has only been granted after the date that principal photography of the film has started, to stop people investing in "phantom" pictures that are never made. "The production company shouldn't be a sham to give a tax saving dressed up as a film," notes Mr Phelan.
However, producers can still walk out on a project or other sources of finance can dry up, leaving investors back where they started.
"There's a risk that the tax saving will be lost, that it will be clawed back," says Mr Phelan. "None of the investors has control over what the company does."
