Film Fetish

Usually, clean tax policy and lack of subsidies can be a warranted source of Kiwi pride.

But look at this mess.

The New Zealand Screen Production Grant, which pays back a proportion of a movie’s expenditure in New Zealand once the project is completed.

...[MaryAnn Hughes, Disney’s vice president of film and television production planning] says “New Zealand was very clever and forward thinking in its latest changes to the production incentive in 2014,” by offering what New Zealand Film Commission chief executive Dave Gibson – whose organisation administers the scheme – calls a “straightforward” 20% rebate.

That “provides us certainty,” Ms Hughes says, “and our finance budgeting group can budget for the 20% base incentive and factor that into our budget.”

Pete’s Dragon is also the first production to qualify for a 5% uplift to the incentive by “providing some sort of significant economic benefit that goes above and beyond bringing the film to New Zealand and providing the economic impact of job creation and money spent on the ground,” Ms Hughes says.

In the case of Pete’s Dragon, the negotiation resulted in Disney making an advance commitment – something the studio normally doesn’t do – that included:

• shooting at least 90% of the film in New Zealand;
• spending at least 75% of the total budget for visual effects in New Zealand;
• employing New Zealander in at least six key personnel roles;
• ensuring at 75% of the production crew were Kiwis; and
• a detailed agreement with Tourism NZ and Film NZ that enables New Zealand to promote and enhance New Zealand’s screen and tourism interests.

Mr Gibson acknowledges “there’s a little bit of ideological resistance from some Treasury people” to the screen production grant but he believes “the government is still reasonably comfortable” with it.

That’s because of the “lovely economic phrase, clean additionality,” he says.

It isn't implausible that paying filmmakers gets more value for money than other tourism promotion efforts. But it looks like Kiwi taxpayers covered a quarter of the film's costs.

Even if it were the case that it would have been filmed elsewhere but for the subsidy, is there such a thing as 'clean additionality' when the government has other things it could have spent the money on, and when taxpayers do as well? Why does this 'additionality' apply uniquely to the film industry rather than to other foreign investment?

It's good to hear that Treasury still objects to this kind of thing. It's depressing that the NBR, the country's business paper of record, let Gibson's characterisation stand without asking Treasury about it. Surely opposition to subsidy-based industrial policy is more than just ideological.

Gibson continues later

“And then if you look at the trickledown,” Mr Gibson says, “you’ll get very, very strong numbers on it, because a lot of people in the film industry – and this is likely one of the reasons why there’s sometimes a little bit of prejudice about it, but it’s a good thing actually – are pretty well paid, so they’re tending to be paying tax at a very high rate.

“Most of them are turning back the money to the government at a rate that’s far higher than 20% – there’s a lot of GST, a lot of coffee being drunk, a lot of restaurants, a lot of cars being hired ...”

Well, if it helps fund coffee-drinking...

The case for this stuff should stand or fail based on whether the tourism promotion value beats other government-funded tourism promotion.

Update: Here's what Treasury said about the effectiveness of film subsidies last time round:

Treasury Comment 

96. Treasury does not support any further subsidies for the film industry. The two evaluations of the current subsidy regime show at best small economic benefits, with limited evidence of spill-over benefits within the film industry, tourism and New Zealand in general. Further subsidies will only increase costs and offer weak benefits. The 2011 evaluation indicated that the LBSPG delivered net economic benefits of $13.6m over the 7 years 2004-2011, at an annual rate of return of less than 1%. In addition, the 2011 evaluation is based on generous assumptions about premiums paid by large productions on goods and services. The current regime is also estimated to have had an overall negative fiscal impact of $168m once tax revenue that would have been earned anyway is taken into account.  

97. Other jurisdictions are offering large subsidies to attract films and further New Zealand subsidies will simply add to this cycle and future demand for larger subsidies. Permanently matching overseas subsidies to generate activity in New Zealand is not a sound basis for economic development policy and favours the film sector over other industries.