Industry disputes claims of European 'subsidy race'

The European Commission’s (EC) claims of a “subsidy race“ among some EU member states to attract large-scale, mainly US, productions has been rejected by several European film organisations in their submissions to the public consultation on EU state aid for the film industry.

In a joint response by the European Coordination of Independent Producers (CEPI), the International Federation of Producers Associations (FIAPF) and the International Video Federation (IVF), the three organisations @respectfully“ disgreed with the notion that member states were competing with one another by using state aid to attract inward investment.

“We are of the opinion that attracting foreign investments into European film production markets is a real boon for the vitality of national film and audiovisual industries,” the CEPI/FIAPF/IVF submission said. “In addition, other real and important direct/indirect macroeconomic contributions are made to national economies and sustained high levels of investment in the film and TV sector.“

Meanwhile, the UK’s British Film Institute (BFI) noted that it was „not aware of any evidence that a subsidy race exists between member states to attract major film production. We would therefore expect that the Commission will provide an analysis of any evidence they have of a subsidy war and of any harm that it has on the European film sector.“

The BFI argued that „for Europe to remain competitive with such territories [as Australiam Canadia and various states in the US], and without a central EU subsidy to attract inward investment, Member States need to be encouraged to incentivise the production of films in their territories as these films benefit the economies and culture of multiple member states.“

In addition, Bertrand Moullier for the Independent Film & Television Alliance (IFTA) suggested in his submission that the EC’s analysis did not consider „the balance between tax foregone and the VAT, income tax and other categories of fiscal revenue realized by EU Member States through the increase in service industries’ activities from capturing these productions,“ while the management of Studio Babelsberg pointed to the “positive economic effects“ of backing major international film productions such as technology transfer particularly in the areas of digital and 3D production as well as knowhow transfer for local cast and crew and knock-on effects for the marketing of cities and regions serving as the backdrops for large-scale productions.

“We venture to make the claim that major studio productions such as The Reader, Valkyrie or Quentin Tarantino’s Inglourious Basterds would not have been in produced in Europe without corresponding attractive and competitive subsidies,“ the studio executives suggested. “If these films had been produced for example in New Zealand, the authenticity and the cultural value of these films would have suffered considerably.“

“The example of Unknown, a thriller where a city as location plays a key role, has also become of major cultural significance for the city of Berlin outside of Germany’s borders. It was only through the national subsidy that this film, which was originally supposed to play in another metropolis, was rewritten and developed for Berlin.“

Furthermore, the European Producers Club (EPC) remarked about the US productions shooting in Europe that „only a tiny part is spent locally (half of the budget is dedicated to marketing and promotion costs). Moreover, only a handful of films per year are entirely filmed in Europe – because the US itself has similar incentive systems.“

“To focus so intently on the US, therefore, seems out of place and irrelevant,“ the EPC concluded, adding that it had “never heard professionals protest that funds used for foreign films take away from national funds.“

At the same time, most of the responses to the consultation concurred that the Cinema Communication’s current maximum overall aid intensity should remain at 50% of the production budget, with higher aid intensities for difficult and low budget films.

Moreover, the European Film Agencies Directors (EFADs) was one of the organisations which welcomed the issues paper’s proposal that an overall aid intensity “of perhaps 60%“ could be introduced “to encourage cross-border cooperation. “Allowing a higher intensity for films which involve activities in more than one member state, including co-productions, could be a relevant stimulus to facilitate their financial and artistic set-up and thereafter their circulation on the territories involved with the co-production,“ the national film agencies noted. The European Producers Club even spoke of 70% in the case “when a European partner joins the production process.“

The public consultation was launched this summer as part of a review of the criteria for assessing the compatibility of national, regional, and local film and audiovisual support schemes with European Union state aid rules.

These criteria were set out in the Commission’s 2001 Cinema Communication whose validity had been extended three times, most recently in 2009, when it was announced that new rules on state aid to cinematographic and other audiovisual works would come into effect by 31 December 2012, at the latest.

A proposed text for a future Cinema Communication will then be published for consultation „possibly in January 2012“, with the new Cinema

Communication to be adopted in the second half of next year.

The European Union’s Member States annually provide an estimated €2.3bn in film support, comprising €1.3bn in grants and soft loans and €1bn in tax incentives. (ends)