After a long delay, Europe finally approved the UK's tax system with considerable modifications. The UK should now join Germany with new tax offerings from January 1 but the process raises questions about subsidies.
The system of tax subsidies for film has always had an identity crisis.
It's been justified as supporting cinema as an art form; it's been about helping local movies find a place in a market dominated by the Hollywood machine.
And of course it's been rather a lot about protectionism. It is the protection of jobs and quotas that is most under threat today.
Any subsidies aimed at giving national film trades an advantage in the global market are going to face increasing scrutiny with governments looking to World Trade Organisation and Gatt agreements.
The European Commission this week insisted on dramatic changes to the planned UK tax credit to ensure that it did not breach its rules on competition.
The UK had hoped to offer a tax credit with two objective - the support for culturally British film AND a tasty incentive to bring in foreign films, particularly those from the US.
The message from the European Commission, however, was unambiguous: You can justify subsidies on the grounds of 'cultural diversity' but not on supporting jobs by bringing in big foreign productions.
The argument that it is precisely those jobs that build the infrastructure on which cultural products can be made seems to have gone unanswered.
'The European Commission may be making a big mistake if it thinks cultural cinema can survive without technicians,' warned Philippe Kern, founder and managing director of KEA European Affairs.
But the dream of building one's film economy around a few big blockbusters has in any case been punctured over recent years.
There are a few countries that have pulled off the trick - New Zealand springs to mind with King Kong and Chronicles Of Narnia following the Lord Of The Rings trilogy.
The success owes much to the insistence of Kiwi director Peter Jackson, who had the clout to match his enthusiasm for New Zealand.
But even there, the industry doesn't have to look far to see the hazards.
The number of big foreign productions shooting in Australia crashed over the last year.
In the 12 months to June 30, production spending from foreign productions was just $17.6m (A$23m), compared with $168m (A$243m) for the previous year - which included shoots for Superman Returns and Charlotte's Web.
Chief executive of Ausfilm, Mark Woods, said the incentive in place since 2001 to attract foreign films to Australia -a tax rebate that refunds 12.5% of what is spent in Australia was tailored towards 'mega movies.'
When those giant blockbusters go elsewhere, it can blow and enormous hole in the local industry.
The country's main film body, Ausfilm, is now calling for an incentive more attractive and flexible to prevent boom-bust cycles.
It may prove to be a wise policy because two big trends suggest that waiting for the blockbuster may prove an increasingly frustrating experience.
One is that the studios themselves are changing their thinking.
Michael Lynton, chief executive of Sony Pictures Entertainment, sees a restructuring of priorities: 'The film market has, like the book market before it, stratified because of distribution. So you have the huge blockbuster movies on the one side and the studios also acting as quasi indie distributors for genre piuctures all under the same roof.
'You've definitely seen the studios get out of the one-size fits all business. Is it a good thing or a bad thing' I think it is an inevitability.'
That was part of the sub-text for the split this week between Sony's Columbia Tristar Pictures and French indie Gaumont.
It's a question of economics, says Lynton.
'It's a function of them going where the money is,' says Lynton. 'And it's also a function of them understanding that the kind of movies you could have made in the past that would have been big studio pictures, that are dramas, you simply can't make those movies any longer and expect to see a profit. You have to make them in a much more contained way.'
There's a strong hint from many studios that the mid-sized blockbusters will be squeezed out between the spectacle and niche film.
The unfortunate coincidence for those basing their dreams on US runaway productions is that many American states and cities decided some time ago that when it comes to subsidies, if you can't beat 'em, join 'em.
New York, for example, has extended its tax credit, allocating $30m in annual funding for a 5% tax credit on below-the-line production expenses through to 2011, complementing a $60m state allocation for a 10% tax credit for the same period.
US tax breaks have ironically started attracting the attention of the financiers who once made their money in patching together cheap deals for US films outside the States.
London-based film financing and production company Future Films last month launched a new US office with the aim of cash flowing the growing number of state-sponsored film production incentives.
'I think that whilst filmmaking in Canada was all the rage, and then it was in Eastern Europe, making films in America is going to be all the rage because of all these state incentives and the weakness of the dollar,' said Future CEO Stephen Margolis.
Equally, there's been a proliferation in the number and scale of tax breaks elsewhere in the world.
Every country now wants a piece of the action. At Cannes this year, Serbia announced an incentive that could be worth up to 21% of budgets for local and international films, and last week Puerto Rico revealed details a 40% tax credit scheme, the second-largest in the world behind Manitoba's 65% facility.
The system of tax subsidies for film has always had an identity crisis.
It's been justified as supporting cinema as an art form; it's been about helping local movies find a place in a market dominated by the Hollywood machine.
And of course it's been rather a lot about protectionism. It is the protection of jobs and quotas that is most under threat today.
Any subsidies aimed at giving national film trades an advantage in the global market are going to face increasing scrutiny with governments looking to World Trade Organisation and Gatt agreements.
The European Commission this week insisted on dramatic changes to the planned UK tax credit to ensure that it did not breach its rules on competition.
The UK had hoped to offer a tax credit with two objective - the support for culturally British film AND a tasty incentive to bring in foreign films, particularly those from the US.
The message from the European Commission, however, was unambiguous: You can justify subsidies on the grounds of 'cultural diversity' but not on supporting jobs by bringing in big foreign productions.
The argument that it is precisely those jobs that build the infrastructure on which cultural products can be made seems to have gone unanswered.
'The European Commission may be making a big mistake if it thinks cultural cinema can survive without technicians,' warned Philippe Kern, founder and managing director of KEA European Affairs.
But the dream of building one's film economy around a few big blockbusters has in any case been punctured over recent years.
There are a few countries that have pulled off the trick - New Zealand springs to mind with King Kong and Chronicles Of Narnia following the Lord Of The Rings trilogy.
The success owes much to the insistence of Kiwi director Peter Jackson, who had the clout to match his enthusiasm for New Zealand.
But even there, the industry doesn't have to look far to see the hazards.
The number of big foreign productions shooting in Australia crashed over the last year.
In the 12 months to June 30, production spending from foreign productions was just $17.6m (A$23m), compared with $168m (A$243m) for the previous year - which included shoots for Superman Returns and Charlotte's Web.
Chief executive of Ausfilm, Mark Woods, said the incentive in place since 2001 to attract foreign films to Australia -a tax rebate that refunds 12.5% of what is spent in Australia was tailored towards 'mega movies.'
When those giant blockbusters go elsewhere, it can blow and enormous hole in the local industry.
The country's main film body, Ausfilm, is now calling for an incentive more attractive and flexible to prevent boom-bust cycles.
It may prove to be a wise policy because two big trends suggest that waiting for the blockbuster may prove an increasingly frustrating experience.
One is that the studios themselves are changing their thinking.
Michael Lynton, chief executive of Sony Pictures Entertainment, sees a restructuring of priorities: 'The film market has, like the book market before it, stratified because of distribution. So you have the huge blockbuster movies on the one side and the studios also acting as quasi indie distributors for genre piuctures all under the same roof.
'You've definitely seen the studios get out of the one-size fits all business. Is it a good thing or a bad thing' I think it is an inevitability.'
That was part of the sub-text for the split this week between Sony's Columbia Tristar Pictures and French indie Gaumont.
It's a question of economics, says Lynton.
'It's a function of them going where the money is,' says Lynton. 'And it's also a function of them understanding that the kind of movies you could have made in the past that would have been big studio pictures, that are dramas, you simply can't make those movies any longer and expect to see a profit. You have to make them in a much more contained way.'
There's a strong hint from many studios that the mid-sized blockbusters will be squeezed out between the spectacle and niche film.
The unfortunate coincidence for those basing their dreams on US runaway productions is that many American states and cities decided some time ago that when it comes to subsidies, if you can't beat 'em, join 'em.
New York, for example, has extended its tax credit, allocating $30m in annual funding for a 5% tax credit on below-the-line production expenses through to 2011, complementing a $60m state allocation for a 10% tax credit for the same period.
US tax breaks have ironically started attracting the attention of the financiers who once made their money in patching together cheap deals for US films outside the States.
London-based film financing and production company Future Films last month launched a new US office with the aim of cash flowing the growing number of state-sponsored film production incentives.
'I think that whilst filmmaking in Canada was all the rage, and then it was in Eastern Europe, making films in America is going to be all the rage because of all these state incentives and the weakness of the dollar,' said Future CEO Stephen Margolis.
Equally, there's been a proliferation in the number and scale of tax breaks elsewhere in the world.
Every country now wants a piece of the action. At Cannes this year, Serbia announced an incentive that could be worth up to 21% of budgets for local and international films, and last week Puerto Rico revealed details a 40% tax credit scheme, the second-largest in the world behind Manitoba's 65% facility.
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