Yesterday's film industry report argues that ending Section 481 tax relief will see production activity plummet. Hugh Linehan reports
Boom or bust? If you were to believe the reports, it's always one thing or the other for the Irish film industry, which seems eternally fated to be either overhyped or undersold. On one issue there is near universal agreement, however. If the Government proceeds with its plans to end tax breaks for film production at the end of next year, it will sound the death knell for film-making in Ireland. A report published yesterday by the industry group Screen Producers Ireland persuasively argues that, without the Section 481 tax incentive, production activity will decline by 80 per cent.
The report, written by the consultant Aileen O'Malley, says that about 4,300 people are employed directly in the film and television industries, that thousands of other jobs in tourism owe their existence to the influence of Irish film and television programmes, that each year the sector contributes €107 million to GNP and attracts aaverage of €136 million in foreign investment. More contentiously, perhaps, it argues that the industry is likely to triple revenue and jobs over the next five to seven years and that it could become the centre for inward investment in Europe, "similar to the achievement of the Irish pharmaceutical sector".
The report's relentlessly feel-good analysis of the past 10 years of Irish film-making is not surprising, given its provenance. The reality is a little more prosaic. There have been some modest domestic successes with Irish audiences and a respectable number of awards at major international film festivals, but no Irish film has replicated the breakthrough international hits of the late 1980s and early 1990s. There has also been, it should be said, much mediocrity and a fair amount of rubbish.
From an economic and employment point of view, the peak of activity was in the Braveheart and Michael Collins years of the mid- to late-1990s, since when there has been a gentle decline (not necessarily a bad thing, given the inflationary pressures this had caused). Over this period, the number of skilled film technicians in the country has undoubtedly increased; we now have a reasonable pool of cinematographers, editors, designers and production managers. These are the people who form the crucial infrastructure of a film-services sector. And we have a small number of the key creative people - writers, directors, producers - who cause films to get made. All in all, it certainly hasn't been a disaster, but there's a sense of lowered expectations.
"Before 1993 we were brought up on a diet of Oscars and hype," says James Flynn of Octagon Films. A producer on such films as Nora and H3 and co-producer on larger productions, including the sci-fi thriller Reign Of Fire and the costume drama The Count Of Monte Cristo, Flynn is preparing to shoot a feature film with the director Damien O'Donnell, one of the most impressive of the talents to emerge in recent years. He also had a major input into the Screen Producers Ireland report.
"There's a perception that if you're not at the Oscars you haven't made the grade. But we now have a generation of major international directors, like Damien O'Donnell and John Moore, coming through." Flynn also points to the awards won at festivals by films such as The Magdalene Sisters and Bloody Sunday. "But we do need a contemporary international hit."
The report sets out to rebut the contention of Charlie McCreevy, the Minister for Finance, that there is "no current justification for extension" of Section 481. It addresses such issues as deadweight (the provision of incentives for activities that would occur anyway) and displacement (the likelihood of film workers' being able to transfer to similarly skilled jobs in other sectors). "A lot of reports don't look at displacement and deadweight, but this one does," says Flynn.
As the report points out, the UK, Canada and Australia already have more attractive and more accessible tax breaks for film. In those countries, the tangible benefits of film production are accepted, as are the realities. The situation here has been more ambiguous. It is widely believed that senior officials in the Department of Finance have always regarded the audio-visual sector with suspicion.
"The civil service think we're either fellas who should get a real job or else we're millionaires who don't need it," says the director Jim Sheridan, one of the key figures behind the report. "If you look at music, we have U2 and The Cranberries and a couple of others. In film, you have me and Neil Jordan and four or five others, people like Damien O'Donnell. We have a good batting average. We've won awards, and we're competing with very little resources."
But are tax incentives, with their often dubious record in recent Irish history, the best way to ensure the survival and development of this cultural industry? McCreevy's decision not to extend Section 481, along with incentives for several other activities, will be seen by many as a move towards greater equity in our tax system and as the elimination of a potential abuse.
In the past, film producers haven't helped their case by being unnecessarily opaque in explaining how Section 481 works. In theory, it offers a tax incentive to those willing to take the risk of investing in an Irish film; in practice, it's almost always a risk-free tax shelter whose benefits are shared between three parties: the investor, the production and the intermediaries who set up the package. Only a couple of months ago, a well-known Irish film producer publicly denied that investors were protected against risk. Since then, McCreevy has confirmed that this is effectively the case. One of the merits of the new report is that it accepts this and gives hard figures on how much of the tax shelter ends up being spent on the film - on average, Section 481 finance will provide between 11 and 13 per cent of the overall Irish spend.
Perhaps because of the complexity of the way film packages are assembled, combined with the popular image of the industry as somehow less than entirely serious, some have raised suspicions about the whole industry. Dick Roche, for example, Minister of State at the Departments of the Taoiseach and Foreign Affairs, has referred to "high rollers and abuse" in the current system. "That's just not factually correct," says Flynn, who points out that the €31,000 limit per investor means the scheme is not particularly interesting for the super-rich. "People who invest millions in property aren't using 481. Also, the film business is the most highly regulated in the country, and we're happy to comply with that." It is true that, with a couple of exceptions, mostly in the early days of the scheme, Section 481 has avoided the scandals and dodgy dealings that often accompany film tax breaks in other countries.
The reality is that our main English-speaking competitors - the UK, Canada and Australia - all have tax schemes to encourage film production, and there is increasing competition from Eastern European countries, which have much lower labour costs. Most importantly, say Irish producers, Section 481 gives them the leverage to raise finance for their films from overseas, money that is then spent in Ireland.
"The industry here is being driven by the European co-production convention," explains Flynn. "The whole idea of a co-production is based on each country bringing something to the table." Without Section 481, therefore, it would be impossible for Irish producers to access co-production finance from other countries. No finance, no films.
Producers also argue that the benefits other industrial sectors receive here, such as low corporation tax and infrastructure grants, do not apply to film. "The unique characteristics of the film industry create unique challenges," says the Screen Producers Ireland report. "Therefore, incentives that have been so successful in other industries cannot be directly applied to the film sector."
Flynn says: "People go on about the subsidised film industry, but Reign Of Fire cost the State €3.5 million, and it returned more than €9 million in direct taxes. I look at sectors like electronics and pharmaceuticals, and I think the comparison with film is very favourable to us."
One wonders how well developed the industry here is. Some have questioned whether the word "industry" is applicable at all to an activity characterised these days by two main models: servicing one-off incoming productions, such as the current King Arthur, and producing films on shoestring budgets. The report argues that the evidence is there for a growing synergy between the two, with skilled technicians transferring comfortably between types and scale of production (including, this year, a substantial number of new dramas for RTÉ).
"Compared to the UK we're quite competitive," says Flynn. "And we now have five or six good crews, whereas 10 years ago we probably only had one. If you look at a film like Veronica Guerin, with the exception of the director, all the heads of department" - the cameraman, the designer and so on - "were Irish. That wouldn't have been possible a few years ago."
Simmering beneath the surface of this debate are the tensions that have always existed between the "cultural" and the "commercial", the "indigenous" and the "international" in debates about film-making in Ireland (and elsewhere). In many ways it's a false opposition: film is both an art form and an industry, it can speak to local audiences and to the world. But although these tensions are not as ideologically driven as they were a decade ago, they still persist. Nor is it just a question of culture versus commerce.
Government support for film, the sort provided here by the Irish Film Board, carries its own potential difficulties: a bureaucratic approach to creative decision-making; a sluggish response to contemporary cultural trends.
"Films have to explain Ireland to an outside audience," says Jim Sheridan. "We have to be looking out, which is really important. In Ireland we exist somewhere between America and Britain, or between America and Europe. Film can help us explain that. We may not have an infrastructure like they have in Britain, but we haven't wasted money like the British lottery has. And you can't just do it with State money. Section 481 is more important to me, although it might not be for a younger film-maker like Robert Quinn," he says, referring to the director of Dead Bodies.
Sheridan believes the film board should be taking a "more punk rock" approach to the films it funds, supporting younger, edgier, rougher work.
The reality is that without a range of measures, including some form of tax break, film-making in Ireland will suffer a disastrous decline. At this year's Cannes Film Festival, John O'Donoghue, the Minister for Arts, Sport and Tourism, stated his commitment to keeping the Irish industry competitive. "We're very happy with the Minister's speech," says Flynn.
But although Section 481 is administered by the Department of Arts, Sport and Tourism, the decision on its future rests with the Department of Finance and, ultimately, with the Government as a whole. With the Irish Film Board, O'Donoghue has commissioned his own report on the issue, from PricewaterhouseCoopers, which is due for delivery at the end of the summer. It will be interesting to compare the two for differences in nuance and in their conclusions. One of the surprising things about the Screen Producers Ireland report, for example, is the conservatism of its recommendations: an increase in the amount of money that can be invested in a film, a commitment to maintaining the incentive for a fixed period and further formalisation of the certification process for qualifying films.
After some 10 years in existence, is the system so perfect that all it needs is such minor tweaking? "We're looking for a 10-year extension to the scheme, with a review after five years. That's what's needed for stability," says Flynn. And is he confident of a positive response? "Confident is a word I'd never use. I would expect and hope that it would be extended."
In his introduction to the report, Sheridan makes an extended analogy between film and football. Does he really believe Bertie Ahern thinks films are as important as Abbotstown, for example? Or that Charlie McCreevy thinks they're as important as the bloodstock industry? "I'd say this: if you went to an American and asked them what Coolmore Stud was, they wouldn't know. But if you asked them about Colin Farrell or Daniel Day-Lewis, they'd know what you were talking about."
