It may not have the physical presence of the Silicon Docks or the IFSC, but Ireland’s audiovisual industry holds an equally conspicuous place in its sector internationally. It has created thousands of jobs here as well as films and television programmes that have won the highest industry accolades and entertain many millions around the world.
A recent PwC report estimates the value of the sector to the Irish economy at around €500m. It’s a contribution that puts it on a par with the value of the aircraft leasing sector and the seafood industry.
Star billing
The PwC report, commissioned by Ardmore Studios and Troy Studios, highlights the central role the section 481 film tax credit has played in the industry’s emergence and ongoing success in Ireland.
Section 481 was introduced in 1994 at the behest of Michael Higgins, currently the country’s president but back then Ireland’s first minister for culture. It allows a 32% tax credit on eligible expenditure in films and TV series, up to a maximum of €70m per project.
The legislation showed its effectiveness almost immediately, with some of the most iconic films of the 90s – Braveheart and Saving Private Ryan – being made here. Since then it has provided the basis for countless productions, including 124 international and domestic productions in 2019.
PwC’s analysis suggests that section 481 delivers a return of €3.80 for every €1 invested and, pre-pandemic, supported the equivalent of 17,000 full-time jobs. It also paints a positive picture for the future of the sector, pointing to government ambitions to raise employment to 24,000 people and to increase the value of the sector to €1.4bn. Facilitating this vision, the government amended section 481 in 2019 to add a skills training provision for productions supported by the scheme.
Spotlight on the sector
PwC’s The Film/TV Industry & Ireland’s Economy report shows that Ireland’s screen industry delivers a positive return on government support, with the direct economic impact put at €275.9m, alongside €141m in indirect economic impact and €52.2m in Exchequer payments.a
Budget challenges
This bright future for the sector may have been intensified by Covid-19. While the pandemic has naturally placed huge constraints on audiovisual production, Elaine Geraghty, CEO of Troy Studios and Ardmore Studios, says that the industry here ‘swiftly adapted and invested significantly to provide a safe environment for productions to continue’, while the crisis has also ‘shown the insatiable global need and appetite for new content and programming’.
In 2020, productions in Ireland included the Netflix series Vikings: Valhalla and Fate: The Winx Saga, as well as Foundation for Apple TV Plus. However, there’s a catch. The major upscaling of TV productions has coincided with a surge in budgets that is creating a headache for the industry as the once generous cap of €70m per project now looks decidedly modest. To compound the issue, the PwC report notes that rival locations such the UK, Hungary, New Zealand and Australia all now offer film tax incentives with no caps at all.
It’s not the first time the issue has been raised. A 2017 report by Olsberg SPI concluded that the cap should be raised to €100m, but this was not acted on. Pressure is likely to intensify, however, as Ireland’s three key studios currently – Ardmore, Troy and Ashford Studios – are set to be joined by further major studio developments in Greystones, Ashbourne and Grange Castle, which the PwC report says will be able to support productions in the €150m–€200m bracket.
Winners and losers
Although many argue that the tax incentive model for filming brings in funds to the state by way of income tax on payments, VAT and tourism, there are those who caution against making section 481 reliefs more generous.
While acknowledging the new requirement for training as a positive, Maria O’Brien, a researcher of film finance policy in Dublin City University, has written that, as a result of it, the industry currently ‘works as yet another FDI-style manufacturing industry, where Ireland provides the space for production, but reaps little in the way of rewards’.
She also warns that uncapping tax relief can have negative consequences. She points to the UK, where close to half the relief claimed under a tax policy designed to support the domestic video games industry was found to have gone to four large foreign-based companies, including Warner Media and Sony. Some commentators have suggested such reliefs risk being used by global payers in the sector to reduce corporation tax payments.
Andrew Lowe, joint MD of Element Pictures, disagrees. He says: ‘Without section 481 there would be no screen industry in Ireland … Most developed countries have a tax credit to support their TV and film industry. Our industry would stall and shrink if the tax credit didn’t exist.’
With more state-of-the-art studio space coming on stream and the government under pressure to deliver growth and jobs, the push for change can only intensify. As the number of big-budget TV programmes hitting our screens multiplies, so does the competition to make them, and many countries are now moving beyond the ‘basic’ tax credit with even more incentives.
In such an environment Louise Cornally, senior vice president of Brown Bag Films, will speak for many in the industry when she says: ‘Ireland must retain the competitiveness of its tax credit to compete internationally.’
