The film industry has brought in R5.8 billion of foreign capital in the past five years, excluding TV and commercials, and should be given incentives to continue with this growth, the association told members of Parliament's finance committee last week during public hearings on the draft taxation law's amendment bills.
The amendments deal with the raft of proposals outlined in the 2009/10 budget tabled in Parliament in February and include refinements to film industry taxation.
Film owners get an upfront 100% deduction for production expenses, and the amendment proposes to exclude banks, financial services companies and insurers from the definition of film owners next year. The Treasury motivated the exclusions as necessary to prevent abuse.
“Government is aware of schemes in the marketplace involving banks, insurers and other financial service businesses. These schemes seek to cycle funds through complex film arrangements in order to obtain the film allowance while producing films of little or no value,” the association said.
However, the association said the prohibition on financial institutions becoming film owners in terms of Section 24f of the Income Tax Act would be prejudicial to an industry in which private equity investors were reluctant to invest, following objections raised by SARS against hundreds of film partnerships under a now-scrapped section.
“This means that capital from financial institutions has to be mobilised to provide funding for film projects, but they are unlikely to allocate this capital without incentives,” the association said.
Source: Business Day
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