OECD Queries NZ Tax Breaks For 'Lord Of The Rings'

by Mary Swire, Tax-News.com, Hong Kong

12 December 2003

In its annual country assessment, the OECD has questioned the viability of tax breaks and subsidies given by the New Zealand government to the producers of the ‘Lord of the Ring’ trilogy as an incentive to film the epic in the country.

In its report, the OECD noted that the government has subsidised the production of the film through various tax breaks to the tune of $300 to $400 million, a sum the organisation observes was a “very large” proportion of its overall budget of $675 million, as well as of the government’s overall budget.

"It is an open question whether the subsidy yielded New Zealand a net benefit," observed the OECD’s report, adding that the additional benefits accruing from the film, such as greater international recognition as a production location were hard to quantify.

The Organisation also considered the establishment of a grant scheme to encourage large budget movies to be made in New Zealand as an "an unhelpful precedent."

Under this scheme, productions spending over $50 million of their production costs in New Zealand will automatically qualify, whilst those spending between $15 million and $50 million are required to spend at least 70% of production costs in the country. This then entitles film-makers to a refund equalling 12.5% of the amount spent in New Zealand.

Recommended