Movie tax credit boost puts Ireland in the spotlight — but issues with the scheme remain
Irish animation studio Cartoon Saloon availed of Section 481 tax credit when making 'Song of the Sea'.
There were not a lot of surprises on Budget Day, but one measure that was not expected was a significant change to a popular tax credit for movie and tv makers.
The expenditure cap on the tax credit Section 481, targeted at growing Ireland’s audiovisual sector, was raised from €70m to €125m.
“This decision will help enable us to compete for major global tent pole film and TV titles, while building upon the industry and country’s reputation as a highly desired international location for film and television production,” said Elaine Geraghty, managing director of Ardmore Studios and Troy Studios.
The relief allows for a payable tax credit of up to 32% of eligible expenditure on a TV or film production that was created in Ireland.
Previous recipients of the credit include Cartoon Saloon who have created Oscar-nominated animations including , and Element Pictures, who created , a Netflix film starting Florence Pugh.
The scheme had been extended a number of times, and is currently extended until 2028, but the last time the eligible expenditure per project increased was in Budget 2016 when it jumped from €50m to €70m, making it more attractive to moviemakers.
More remarkably, the change to the relief marks one of the one of the few long-term measures in this year’s budget.
The lack of long-term strategies in the €6.4bn budgetary package published earlier this week was criticised by experts including the Economic and Social Research Institute (ESRI) who said temporary measures will reduce the risk of poverty for households next year but more lasting measures are needed to improve household finances.
“To accomplish long-lasting, significant improvements to the living standards of lower-income households, a more permanent solution will be needed,” said Dora Tuda, a research officer at the ESRI.
The move by Finance Minister Michael McGrath was largely welcomed by the industry, especially after it was rocked by the pandemic as sets had to come down and actors could not meet on site to act due to covid restrictions.
Director of Audiovisual Ireland, Torlach Denihan, said the new cap has created “immense potential to elevate the sector even further”. However, this boost could be part of a bigger play by the Government rather than just offering a helping hand to an industry that employs around 12,000 people.
It may have been introduced as a ploy to make Ireland more attractive to streaming giants especially as the EU tries to get more domestically created content on screens.
Ms Geraghty said the change to the tax credit will make Ireland “more globally competitive to attract major high-end television and film productions, bringing valuable inward investment”.
In recent years, the European Commission implemented a 30% homegrown content quota for on-demand services to comply with through the Audiovisual Media Services Directive. The aim is to push streaming companies to create more European-focused stories.
Increasing the cap for Section 481 could make Ireland a choice destination for streaming platforms as a result.
Ms Geraghty also welcomed government’s “commitment to engage with the European Commission to develop an incentive for the unscripted sector, a long-standing, yet growing content sector and such an incentive will encourage more international production companies to look to Ireland as their hub”.
The Government was largely criticised for its overreliance on multinationals in the lead-up to the budget by budgetary watchdog, the Irish Fiscal Advisory Council, and others — especially with the recent fall-off of corporation tax receipts amid a slowdown in the tech sector and a sticky inflationary environment.
These receipts will face more challenges next year as Ireland’s corporation tax rate is set to increase from 12.5% to 15% in January as part of a global agreement to even the playing field when it comes to foreign direct investment.
Increasing the cap on Section 481 could offset this change and put Ireland in the spotlight for large streaming giants.
However, there are still problems associated with the scheme. Many actors have suggested that they are less well-off financially because production companies do not have to comply with copyright legislation before receiving the relief.
Earlier this month, a petition signed by 3,700 actors in Ireland, the UK, Europe and the US including Cillian Murphy was submitted to an Oireachtas committee on the matter.
“For decades, Irish actors living in Ireland have been offered contracts by Irish production companies with lesser terms and conditions than those offered to their international colleagues working on the same productions,” said Irish Equity president Gerry O’Brien.
“These contracts have ignored the protections offered to Irish actors by national and international copyright law, denying them access to potential future earnings,” he added.
Mr O’Brien said these practices are “unacceptable”, particularly because these productions “are financed by the public through Screen Ireland”, a semi-State body.
“The eyes of the international audiovisual sector are on Ireland," he said.
"Irish actors are part of an international community that has no desire to see their hard-won rights undermined by these kinds of practices."
Meanwhile, around 26 productions have been granted relief through the tax credit last quarter.
The figures for the final three months of 2023 will be released by Revenue at the end of the year.
Earlier this year, Revenue published figures that showed the total value of payments granted to firms under Section 481 last year came to more than €127m, a €9.8m decrease on 2021.
Wicklow-based production firm Metropolitan Films International, which was partly behind Oscar-nominated , was one of the major beneficiaries of the scheme in 2022.
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