Europe Gives Nod Of Approval To Irish Film Industry Tax Incentives

by Jason Gorringe, Tax-News.com, London

19 May 2006

The European Commission has endorsed a new system of tax incentives designed to encourage growth in the Irish film industry, announcing on Wednesday that the scheme does not constitute state aid.

The Irish scheme to support film production amends an earlier scheme previously approved by the Commission, and allows film production companies to obtain 80% tax relief on investments of up to EUR35 million or 80% of the production budget of a single film.

The EU's state aid rules are desiged to prevent one company or industry getting favourable tax treatment or other incentives from national governments to the detriment of other companies or sectors, in the interests of maintaing a level competitive playing field throughout the union.

The Irish film industry had been lobbying Dublin for more generous tax breaks for some time, following something of a decline in spending in recent years. The Audiovisual Federation Review 2004/2005, which was published last December, showed that while TV production was up in 2004, it was a challenging year for production in the Irish film sector, which has seen overall expenditure decrease to EUR106.7 million in 2004 from EUR151.4 million in 2003.

While industry experts have noted that the falling value of the dollar has played a large part in the decline, some feel that the Irish government's earlier tax incentives, known as Section 481 incentives, actually discouraged big budget producers from shooting in Ireland.

In response, Irish Finance Minister Brian Cowen announced in the 2006 Finance Bill, published in February, that the percentage of expenditure that is eligible for tax relief would be raised to 80% for all films, up from the existing levels of 55%-66%

Despite the waning interest in Ireland as a film location, the sector nonetheless contributed some EUR12.2 billion to the Irish exchequer in 2004.

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