Film tax abuse scam costs public purse €23m

FILM companies and investors abusing a State tax relief scheme have been forced to pay back €4.5m to the Revenue Commissioners as part of a clampdown on a scam that has cost the taxpayer more than €23m.

Production firms abusing the system are being targeted by new revenue inspectors. In the first project of its kind up to 30 films will have their spending budgets trawled through.

Under section 481 of the Taxes Consolidation Act 1997, tax breaks are offered to investors putting up money for films which then generate cash for local economies where the productions are shot.

Abuses in the system have already cost the taxpayer more than €23 million.

Following Oireachtas hearings from a number of film groups that were not abusing the system but were worried about how it would damage the industry, the Department of Finance agreed to pursue the lost revenue and put in place measures to protect section 481 and extend the relief scheme until December 2007.

Now the Revenue Commissioners have advertised for consultants to tackle “inflated” film budgets.

“The specific duties of the consultant will be to evaluate film budgets and provide expert advice to revenue, in respect of each budget referred. In particular, the consultant would be required to state whether the budget or any aspect of the budget was overstated,” said the Revenue Commissioners.

New figures from Revenue show film investors have already paid back €4.5 million in tax grants.

“Revenue is pursuing the outstanding relief. Agreement has been reached with investors to recover some €4.5 million. The remaining cases are at various stages of investigation, including pursuit through the courts,” said a spokesman.

The budget experts, while also reporting directly to the commissioners on excessive tax relief claims, will be required to give court evidence if the Revenue Commissioners remove the film tax break certificate.

The film industry is a net producer for the Irish economy, keeping over 4,300 people in employment and adding an estimated €107 million to GDP.

While film representatives with Screen Producers Ireland, an umbrella group for the industry, claim a large portion of the tax relief “inflated” claims were before 1996, Revenue Commissioners are determined to stamp out any ongoing abuse.

“Consultants would also advise on particular aspects of the budget that should be examined, by Revenue, as part of any compliance procedures, after production has been completed,” said a spokesperson.

Previous abuses discovered by the Department of Finance section included “no evidence” of a film on TV or in the cinema and only a “poor quality copy of a tape.”

In other cases, Revenue was concerned other individuals granted reliefs under section 481 spent budgets abroad or did not even make a proper film.

Some of the big budget movies made here in recent years that have not abused the State tax relief scheme include Mel Gibson’s Braveheart, shot in Co Wicklow, and Steven Spielberg’s World War II epic, Saving Private Ryan.