Film undustry bets on tax change

  • 2011-04-27
  • By Matthew Garrick

BIG TIME: Gary Tuck says that without help, film will remain a cottage industry.

VILNIUS - In a bid to hoist the waning Lithuanian film industry into direct competition for foreign business with other Eastern European countries, the Lithuanian Producers Association were this week preparing to bunker down in talks with politicians, aimed at settling upon an agreement for implementing a new national corporate tax incentive scheme.
If passed through the national parliament, lobbyists have said the scheme could transform the national film industry, and bring millions of euros’ worth of foreign investment into the economy.

“Without an incentive or a rebate scheme, the film industry in the country will remain a cottage industry,” said lobbyist and managing director of Vilnius-based Baltic Film Services, Gary Tuck. “As more and more countries introduce tax rebates, we are finding it very difficult to compete.”
The corporate tax amendment scheme blueprint being most closely discussed, based on a model implemented by Hungary in 2004, would potentially facilitate foreign and local companies investing in films to receive money back from tax on their investment.

The underlying push from the Producers Association for their cause was, once foreign films were coaxed by the incentive to produce in Lithuania, the companies would hire local professionals, as well as filter millions of outside euros into the local economies.

“Defiance [filmed in Lithuania in 2008, and starring James Bond star Daniel Craig], the movie, over a six-month period, delivered seven million euros into the local economy and created around 200 jobs. Imagine if you could bring four or five of these movies in per year. Imagine the money coming into the economy,” commented Tuck.

Though the premises of the scheme appear logical enough, the Producers Association has said the difficulty had been convincing politicians the film industry was a legitimate business, rather than simply a cultural art form. “It has been a long phase of conversation with politicians, explaining the incentive, while other countries, such as Serbia and Bulgaria, are implementing tax rebates. It’s very competitive and it has put Lithuania at the very end of a long rope,” stated lobbyist and member of the Producers Association, Lineta Miseikyte. “It’s not just art, it’s big business.”

Politicians appeared as of last week to be getting onboard with the proposal, as governmental members, such as the Ministries of Culture and Economy, expressed their interest. “We are very much for the incentive, but it’s not easy [to rush its implementation], as we have different points of view from other ministries, but negotiations are happening,” announced a member of the Ministry of Culture, who preferred to remain anonymous. “It’s all very, very fresh yet.”

Also billeting for the case, The Baltic Times was told, was national MP Petras Austrevicius, who wrote a letter to the Lithuanian Prime Minister Andrius Kubilius “with a suggestion to make up a working group to develop drafts of legislation with the aim to attract foreign investors to our film industry,” said Ministry of Economy PR spokesperson Laura Sebekiene.
“On April 14, the government of Lithuania assigned the Ministry of Culture to make a working group comprised of representatives from the Ministry of Finance, Ministry of Economy, the State Tax Inspectorate, the Competition Council and the Association of Producers,” announced Sebekiene. “The Ministry of Culture will take the leadership of this working group.”

The government-run workshop has the aim of negotiating propositions of how the film industry can maintain and produce better economic outcomes within Lithuania, but film professionals worry as to how long these conversations may last. “I hope we will have the final word on the law soon, as soon as this year. Because then we still must get consent from the European Commission. If we had that, we would have a lot of productions coming,” said managing director of Lithuanian Film Studios, Ramunas Skikas. “Wages cannot go down anymore. They can only go up.”

Due to the lack of consistent foreign film investment in Lithuania, coupled with the back of the economic crisis, the local industry is struggling to maintain up-to-date film technologies. Construction of the Lithuanian Film Services’ new studio seems all but halted, while what is left to be seen of the state-run studios utilized by companies such as Baltic Film Services and TV3 Lithuania, on the outskirts of Vilnius along Nemencines Street, is demolished rubble and an empty block. The Soviet-built studio started being torn down before last Christmas, privatized and sold to investment companies.

“Local filmmaking does not have enough to sustain that kind of infrastructure,” lamented Tuck, “Foreign films bring money into the country and help employ people. To service a big foreign film, new industries would be set up, such as for special effects, transport and catering. Foreign companies, whether it is Barclays Bank or Defiance [the movie], create infrastructure. From an economic point of view, you’re creating an industry.”