Belgium: In the money

The Belgian Tax Shelter both unites and fiercely divides opinion in the territory’s film industry.

Everyone agrees that the shelter, introduced in 2004, is crucial to the success of Belgian cinema. It has already generated well over $910m (€700m) from investors and is now reckoned to channel up to $260m (€200m) of investment a year. The shelter generates co-production and is considered very Europe-friendly.

Nonetheless, there is disquiet among some industry figures about how the shelter works — in particular, the way its critics feel it favours investors and their intermediaries rather than producers — with calls for it to be revised. Concerns are being addressed by the Federal Parliament in a series of meetings due to be held throughout the spring.

“The Tax Shelter has tapped into something that was already there — a strong local market where a lot of things were being made. It has brought us an instrument to get finance for films and has also given an instrument to co-produce,” says Peter Bouckaert, head of Eyeworks (Belgium).

‘It has been a huge success. The investors are happy… Production has benefited’

Adrian Politowski, uMedia

However, Bouckaert is calling for reforms to the shelter, arguing it has become “inefficient”.

“[The shelter] is commercialised purely on the promise of guaranteed returns in investment, which as we all know doesn’t exist in cinema,” Bouckaert says. “The cost of the system has exploded.”

Those advocating reform say too little of the money reaches producers — and too much goes back to the investors and middlemen. Some sources say as little as 15% of the money raised through the shelter is actually going into films. Others contend the shelter is aimed at foreigners rather than boosting local film.

These suggestions are dismissed by Adrian Politowski, CEO of uMedia, the production/finance company which has backed such films as The Artist and the forthcoming Grace Of Monaco, which both received Tax Shelter support. “It has been undeniably a huge success,” says Politowski, who claims that for every euro the Belgian state gives as a tax break it gains $1.57 (€1.21) back. “The investors are happy, hence the growth. Production has benefited. Employment has increased by 23%.”

Politowski, who expresses the fear that tinkering with the system’s delicate mechanics could unbalance it, anticipates “minor” changes but is confident it will remain attractive to investors.

Favourable terms

“The law as it is would be really good if it was enforced and respected,” says Genevieve Lemal of Tax Shelter financier Scope Invest. Her inference is clear: some parties are stretching the guidelines. Inevitably, investors are drawn to companies offering the best returns — even if those companies don’t give producers the most favourable terms.

However, she is sceptical about producers calling for the Tax Shelter to be overhauled: “It is often the people who complain the most about it that do the worst things in the market.” She adds that the producers “would like it to be free money, and that is not realistic”.

To outsiders, a system that guarantees investors a return on their money seems too good to be true. But as Politowski explains, “every single person that raises money covers that risk and that is something accepted by the authorities”.

$910m - amount Belgian Tax Shelter has generated since 2004

The maximum return fundraisers can guarantee is 4.5% on investment, and anything beyond is dependent on a film’s profits, but operators tend to offer investors better returns than that. Earlier this year, producers Be Films, Nexus Factory, nWave Pictures and Saga — all companies that have worked with uMedia — set up a Belgian Film Producers Association (BeFPA). The new outfit is lobbying for the shelter to be retained.

Research commissioned by uMedia from accountancy firm Deloitte suggests that the net gain for the Belgian state from the Tax Shelter since 2003 is $100.1m (€77m). At a time of economic crisis and rising unemployment, that is a dividend no politician wants to lose.

And as Hans Everaert, financial director of public funding agency the Flanders Audiovisual Fund (VAF), points out, there is no desire in Belgium to demonise the middlemen. “If they get a reasonable commission for what they are doing, nobody is against it. On the contrary, it’s good if they can find investors to invest in film — but of course if, in the end, the middlemen give such big profits to investors and retake a big part for commission, legal fees, etc, then hardly anything remains for the producer of the film as such.”

“If you look at why tax regimes have stopped in other countries, it has come down to two reasons: the state is losing money and it hasn’t helped the industry to grow,” Politwoski suggests. That is clearly not the case in Belgium.