Film industry tax relief is a cheap and effective boost to our economy

AS you know, these are difficult times, especially for job creation. Imagine what the government’s reaction would be if they were approached by a group of private sector entrepreneurs with a proposition like this: “We’ll start an industry which will employ approximately 4,000 highly-skilled and well-paid people."

"It will be an exciting, fast-moving industry plenty of risks, but plenty of adventure too.

"The products made in this industry will be sold all around the world.

"Every time a product is sold, the result will be to attract more investment from abroad. Some of the products will fail we told you this was a risky industry. But the ones that succeed will do Ireland good in a lot of ways.

"The magic of these products can make visitors come here in thousands, they can attract all sorts of additional investment, they can add colour and excitement to the country. The infrastructure can be put up in no time, there will never be planning permission problems, and there will be spin-off jobs all around the country."

If that proposition were made to government in the morning, the first thing they would do (I hope) is check out that it's for real, and that the people behind the idea are reputable.

If they were, the second thing the government would do is ask: "how much?" In other words, "what size grant do you want, how can we support you, what sort of back-up do you need?"

And if the promoters said, "it's all right, we'll raise the money from Irish people who are prepared to take the risk all we want is that you'd give them a modest enough tax break," the government would heave a sigh of relief and agree immediately.

And they'd be right to do it. The funny thing is, we already have an industry just like that, called the Irish film industry. It does all the things it says on the tin it makes solid movies for export, it draws massive attention to Ireland, it attracts very considerable investment, it trains actors, directors, technicians, professionals.

One of the prime sources of funding for this industry is called Section 481. It's a tax break that allows Irish investors to write off money they invest in making movies against their income tax liabilities.

You'd want decent disposable income to be able to make such an investment, though it's not necessary, unlike a lot of other such schemes, to be a millionaire (the maximum amount an individual is allowed to invest under the scheme is around €30,000 a year, though companies can invest several million).

The investment, if it is to qualify for relief under Section 481, is supposed to constitute a risk so any scheme that protects the investor from such things as budget over-runs or the film being a commercial flop won't qualify for the tax relief. And of course, the money raised must be spent in Ireland.

Since this scheme was introduced by Michael D Higgins it has cost on average around €30 million a year not in actual grants, but in what the Department of Finance calls revenue foregone if the tax break for the movies hadn't existed, and if the investors hadn't been able to qualify for some other form of tax relief, the country would have been about €30 million a year better off.

But in return for the investment we made, more than 250 projects have come to fruition, and an investment of around €1.75 billion has been made.

Not all the films are world-beaters, and I guess you can't even say that all of them are recognisably Irish, even though they are made here. But the list of movies adding value to Ireland's reputation around the world is a long and distinguished one.

Incidentally, a year ago or so I saw a preview a rough cut, they call it of a movie made here, though set in New York. It was brilliant, it was directed by Jim Sheridan and when I saw it, it had the working title of East of Harlem.

Now it's called In America and it's about to be released around the world. I'll make a small tax-free wager that after its release, the Irish film industry will be a major international talking point once again.

Why am I telling you all this? Because for reasons that nobody can understand, the Minister for Finance has decided to end the tax relief scheme which has been the basis for all the investment in the film industry I have described.

He announced it baldly, in the last budget, by lumping the film tax relief together with a number of others. The only reason he gave was as follows:

"I am bringing forward to 31 December 2004 both the termination date for film relief and that for student accommodation relief.

"Given the current and prospective budgetary position, the existing demand for property investment and the desire to improve equity in the tax system, there is no justification for a continuation of these reliefs beyond 2004."

THAT's not a reason, minister. While there is no doubt a bit of special pleading in some of the arguments put forward by the film industry here, there is equally no doubt that the abolition of the scheme would be a massive blow.

Some people fear that 3,000 jobs would disappear overnight. I reckon the real truth is that the industry would just begin to wither on the vine.

And that would be a tragedy. This scheme costs very little (nothing at all in public expenditure terms), and it generates massive investment and spin-offs.

We can be absolutely certain that the Minister for Finance, with his hatred for public spending, is not going to replace the tax incentive with some kind of grant assistance. No, state support for the film industry will simply disappear if the tax incentive scheme is abolished.

I don't usually argue for the retention of tax breaks. We live in a county where tax evasion (the illegal kind) has crippled us for years, and there are far too many vehicles for tax avoidance (the legal kind).

The annual report of the Comptroller and Auditor General refers to nearly a hundred different tax breaks, costing billions of euro. Many of them (the majority, in fact) allow people to get very significant breaks for no-risk investments, mainly through investing in different forms of property.

In one astonishing paragraph, the comptroller points out that the 400 highest earners in Ireland were able to avail of a variety of different tax breaks in 2002 to reduce their effective rate of tax. How much did we give the richest 400? A grand total, believe it or not, of €72.65 million.

The film relief isn't, as I said, of much interest to the super-rich. Of that total of €72.65 million, the richest 400 generated only €150,000 from the film relief.

Its abolition, therefore, won't penalise them. It will only punish the actors, writers, directors and others now and in the future who do so much to create the image of modern Ireland.

What have they done to deserve this mean and meaningless cut?