MEL GIBSON’S TAXING ISSUE

Mel Gibson

THE MOVIE suits don’t generally wash their dirty linen in public, which is why Mel Gibson’s spat with Voltage Pictures – producers of the Dublin-shot The Professor and the Madman – has begun to generate serious interest. The gaze has finally rested on the state’s generous Section 481 tax scheme, but there are more pertinent questions that were raised by the Department of Finance ahead of this month’s Budget.

As fans of Goldhawk will know (see The Phoenix, 29/6/18), Braveheart Gibson and the film’s debutant director and writer, Farhad Safinia, have alleged various financial dodges on Voltage’s part, which the firm strenuously denies.

Given the plot twists, concerns have been raised in the offices of the Revenue Commissioners, where allegations that producers are gaming the Section 481 system reflect very poorly.

The Revenue told Goldhawk that it “carries out a comprehensive programme of ‘outdoor’ compliance operations each year across a broad range of economic sectors, including the film industry,” often on a multi-agency basis. “The primary role of these joint investigation units is to detect non-compliance with tax and duty obligations, which includes non-operation of the PAYE system on foot of bogus self-employment… Compliance interventions are often complex and detailed and can take some time to complete.”

While the industry awaits the detail of the Finance Bill, the Budget did contain some treats to assuage lobbyists like Screen Producers Ireland and Animation Ireland. There was an 11% increase to €20m for the Annie Doona-chaired Screen Ireland (formerly the Irish Film Board), which gives James Hickey et al an extra €2m to dish out in 2019.

Paschal Donohue also delivered an extension of the Section 481 tax scheme to 2024 and a 5% “uplift” in the tax credit (from 32% to 37% of eligible spend) “for productions being made in areas designated under the State aid regional guidelines.”

The smart money says that the big beneficiary here will be Siún Ní Raghallaigh’s Troy Studios in Limerick, which is currently empty but planning on expansion – which makes sense when the state is effectively covering 37% of the rental fees.

A significant document that has been rather overlooked in light of the Mel Gibson spat is the cost-benefit analysis produced by the Department of Finance ahead of Budget 2019. This holes Josepha Madigan’s Olsberg/Nordicity Report below the waterline by side-stepping the fuzzy numbers of “full-time equivalent jobs” and assorted multiplier effects. As a result, the mandarins claim that the approximate tax cost (ie revenue foregone) of Section 481 in 2017 was €100m – up from €52m as recently as 2015 – with a total cost (including so-called “shadow costs of public funds”) of €315m over the period 2015-2017.

More damningly, the analysis claims that the economic impact of the scheme in 2016 was minus €72.4m – an amount similar to the annual allocation received by the Arts Council. On top of this, there is the substantial additional annual public funding for the industry courtesy of Screen Ireland, the Broadcasting Authority of Ireland and the likes of RTÉ.

Of course, as the cost-benefit analysis notes, “no attempt is made to gauge the cultural impact of the S481 tax credit”. Goldhawk is unsure, however, of the exact cultural impact of funding an expensive US sci-fi series like Nightflyers, filmed at Troy Studios in Limerick.