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In the film production business, Ireland has moved from struggling lower division team to Premier League status over the past 30 years. According to the industry bible Variety magazine, the country has established itself as “one of the world’s most attractive production environments”.
Screen Ireland estimates that the film, TV and animation industry is worth more than €692 million and employs 11,960 people either directly or indirectly.
Production activity has continued to grow steadily. Production spend in the Irish economy on goods and services hit an all-time high of €508 million in 2021, an exceptional year due to the increased level of activity following the Covid-related production shutdowns. In 2022 a spend of €361.5 million was recorded, driven by both Irish and international productions – an increase of €4 million from 2019, the year preceding the pandemic.
The industry seems poised for significant further growth, with Ireland viewed as well positioned to attract new productions. According to a 2020 report by PwC, Global demand for audiovisual content is predicted to rise by 30 per cent from 2020-2025, steaming services being the main engine of growth.
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But although many in the industry like to cite factors such as experienced and talented producers, writers, actors and crew, quality locations and enhanced studio facilities – all of which apply – there is no getting away from the big driver of investment: tax incentives.
Section 481 is the key tax break in this area. In simple terms it provides a tax credit of up to 32 per cent on eligible expenditure on a TV show or film produced in Ireland. The recent Budget extended the cap on the tax relief from €70 million to €125 million. The tax incentive is also tied to providing training to enhance the local skills base of the sector.
In 2019 Ireland was one of the first countries in Europe to link its filming tax credit to skills development, ensuring that sustainable growth across the screen industry provided structure and stability to Irish crew through these opportunities. Since then Screen Ireland says it has evaluated skills development plans from more than 220 productions and 2022 saw a total of more than 3,500 skills development placements across Section 481 training, courses and other skills development initiatives, including mentorships and shadow directing.
The 2022 Olsberg SPI report, The Cultural Dividend Generated by Ireland’s Section 481 Film and Television Incentive, indicated that 89 per cent of incoming production expenditure can be attributed to Section 481. It also highlighted that a high proportion of projects accessing Section 481 rely on creative local talent, with 68 per cent of productions using Irish talent between 2017 and 2021.
The Government’s Audio-visual Action Plan has set an ambitious target to double employment in the sector but there are mixed views in the industry about whether our tax breaks go far enough.
Garvin Burke of the Film Production Academy, a film funding and training platform, and a small independent producer himself, feels they don’t.
“There should be no upper price cap on eligible spend,” he says. “After all, it is money that has to spent on the island of Ireland on jobs and services. Even with the tax credit of 32 per cent, these are high value jobs more than likely taxed at the higher marginal rate. Then there’s the multiplier effect of monies spent in the local economy on support services and goods.
“How much does this cost the Irish taxpayer? Nothing at all. It is positive to the exchequer as it takes people off social welfare by creating high value employment and service demand.”
There is some evidence to back Burke’s view that the tax incentives, while welcome, don’t go far enough and that money invested in the sector through tax breaks generates a solid net return.
To provide an idea of the sector’s economic contribution, consulting firm PwC was commissioned by Ardmore/Troy Studios and a range of industry bodies to look at the contribution to the economy of a representative sample of nine productions. The collective contribution of these nine to Irish-based suppliers for production services amounted to €108.8 million, while the full economic impact was measured at €144.3 million, as well as 1,391 full time equivalent jobs. In addition, just over €11 million in payroll was recorded.
Set against that, €45.5 million was the cost to the Exchequer in Section 481 tax breaks. The implication, albeit from a limited sample, was that Section 481 was delivering good value returns for the economy.
Ireland sells itself on the full package. It isn’t just the tax incentive; it’s the tax incentive along with very experienced producers, along with experienced and awards-winning talent, crew and locations
— Louise Ryan, Screen Ireland
The contribution may in fact be significantly greater when spin-off benefits are considered. The economic benefits to the local economies of film locations are well recognised – although difficult to quantify – while other intangibles include potential uplifts in international tourism as a result of high profile productions such as The Banshees of Inisherin.
Louise Ryan of Screen Ireland acknowledges the importance of the tax incentive but feels it is just one factor in the development of the industry here.
“Ireland sells itself on the full package. It isn’t just the tax incentive; it’s the tax incentive along with very experienced producers, along with experienced and awards-winning talent, crew and locations,” she says.
“You can go from urban locations to beautiful country locations quite easily. Logistically, you can also get from Dublin Airport to somewhere like Ardmore Studios very quickly and from the city to the country very quickly. That’s a significant factor when you are working out your costs on a production.”
Government policy has involved a dual mandate of attracting big-budget international productions while also ensuring that smaller-scale local productions are supported, she notes.
Section 481 certainly offers a huge improvement on what was there before. Just ask veteran producer John Kelleher.
Kelleher and David Collins’s Strongbow Productions were the promoters and producers of the feature movie Eat the Peach in 1985, one of the few productions filmed in Ireland at the time. The film was a beneficiary of Business Expansion Scheme (BES) Funding, the key method of tax relief then available. Despite critical acclaim, the movie ended up losing serious money for the promoters, while its BES subscribers had to settle for tax breaks rather than profits.
The move from BES to Section 481 represented a shift from a local investor-based incentive to more of an FDI policy, with the key aim of attracting global productions.
John Kelleher Media, which Kelleher established in 2011, has produced movies and documentaries including Two Wheels, Good, The Bailout and The Guarantee, and enjoyed the benefits of 481 tax breaks in his more recent productions, so Kelleher is well positioned to compare and contrast the old and new regimes.
“Section 481 has been a very significant help to us in many of our productions which we have been very grateful for and in some cases we may not have been able to finance our productions without it,” he says. “In ballpark terms, subject to conditions, you are looking at an incentive that equates to around a quarter of your production budget.”
Kelleher agrees that the film sector has moved from cottage industry status to fully fledged international business “punching above its weight” and is in no doubt that Section 481 has underpinned this.
“Investors are very hard headed and they will go where they can find the best deal, whether that’s Bulgaria, Romania or South Korea. Our tax incentives have enabled us to compete internationally,” he adds.
Kelleher also credits to Screen Ireland. “Down the years the investment they have made in development and production, marketing and training have been very significant,” he says. “I think they have been particularly good in developing and fostering early talent that then goes on to do the bigger stuff – where Section 481 kicks in.”
While the film industry is now well developed, Ireland’s gaming industry is further back on its journey. The potential is enormous here as gaming is a global business worth $227 billion, with a forecast compound annual growth rate of close to 8 per cent between now and 2027, according to PwC.
Tax is again the instrument the Government is using to drive development. The Tax Credit for Digital Games is a refundable corporation tax credit available to digital games development companies for qualifying expenditure incurred in the design, production and testing of a digital game. Like film production, it is available up to rate of 32 per cent of eligible expenditure. However, the maximum relief is restricted to €25 million per production.
Pádraic Rehill, PwC tax director, says that while the relief is welcome it doesn’t go far enough in the context of a business that engages in budgets much greater than that. However, in the nature of such reliefs, it is likely to reviewed in the years ahead, he agrees. Guaranteeing the relief on a longer-term basis, as well as making certain tweaks to the gaming tax regulations including extending relief to post-production expenditure, would also be helpful, he says.
“If you are sitting in Hollywood, you are looking at a seven-year time frame for the development of a production and that certainty needs to be there. It’s a very dynamic business and it is important that we fully understand the nature of how it works,” he says.
The gaming industry here has largely bootstrapped itself without the level of support the film industry has enjoyed and game producers have been slow to embrace the tax credit. But it is early days and Reihill feels the industry is feeling its way around the legislation at this stage.
“There are a lot of passionate people in the industry and they do a lot of good work and co-development, which is something that is not provided for under the current relief. There has to be one company set up to claim the relief while the industry would like to see some way of providing for the fact that more than one company might be involved in development.”
Turning to the film industry, Reihill says that aside from Section 481, one of the big issues in the industry is studio space; demand often outstrips supply, especially where larger productions are concerned.
Until relatively recent years, Ireland had one full-scale studio, Ardmore in Bray, which has been in operation since 1958. The past decade has seen a big increase and there are now half a dozen facilities, with more studios in the pipeline, including in Grange Castle, Gorey and Mullingar.
Ardmore/Troy Studios and Ashford are the largest. Ardmore has been the location for recent productions including Cocaine Bear and The Pope’s Exorcist, while the expanded facility at Ashford is now set to be the hub for Fox Entertainment’s big US hit show Next Level Chef with Gordon Ramsay.
Elaine Geraghty, CEO of Ardmore/Troy Studios, acknowledges that the ramping up of studio capacity has been a game changer for the industry, enabling it to facilitate both a larger number of productions and bigger-scale, bigger-budget productions.
“It allows us to have conversations we wouldn’t have been able to have otherwise. My sense is that next year when the industry settles down again after the industry strike, there will be a race for space,” says Geraghty.
The larger productions are very welcome but development of the studio facilities will be of equal value to smaller indigenous producers, she says, noting that “the rising tide will lift all boats”.
Geraghty says the tax treatment of the industry here is positive. She acknowledges that the Section 481 legislation rules are strict and says that that is a good thing as public funding should be accountable and transparent. She welcomes the lifting of the cap which she says makes it easier for Ireland to market itself abroad and hopes that it will be lifted further in the years ahead.
“We’re very good in the Ireland at telling our story. The minute the cap was lifted in the Budget, we were all out of the blocks sharing the good news with the international industry,” she says.
Ireland’s film industry has come a long way in a relatively short time and, together with the gaming sector, seems poised for a bright future. The tax treatment of these creative industries may not be perfect but it seems to be making a solid contribution to their prospects.