Refundable tax credit

An ordinary tax credit only helps somebody with a tax bill to reduce. A production company set up for one film, in a country it does not otherwise trade in, has no such bill, so the credit is worth nothing to it. A refundable credit solves that by having the revenue authority write a cheque instead.

Ireland’s Section 481 is the version most copied. Thirty-two percent of the lowest of eligible expenditure, eighty percent of total production cost, or the per-project cap, paid directly to the producer company since the start of 2015. Knowing why it became payable is the useful part: under the previous investor relief a headline rate of 41 percent reached producers as only 26 to 28 percent, and the state’s own assessment described the scheme as inefficient and inequitable. The most imitated design feature in European film policy is a leak repair.

Colombia solves the same problem a different way, by issuing a transferable certificate the foreign producer can simply sell to any Colombian taxpayer, with the proceeds of the sale untaxed. Either way the requirement is identical and it is the reason the instrument sits outside a community’s reach: it needs a corporation tax system and a revenue authority willing and able to pay out more than it collects.

Source: Section 481, Taxes Consolidation Act 1997, statute free at https://www.irishstatutebook.ie/eli/1997/act/39/section/481/enacted/en/html#sec481 , with current rates and caps from Revenue, free at https://www.revenue.ie/en/companies-and-charities/reliefs-and-exemptions/film-relief/index.aspx . The leakage finding is the Department of Finance’s own, in Economic Impact Assessment of Section 481 Film Relief, December 2012, free at https://assets.gov.ie/193885/a2e8b485-c0dc-43e6-871a-bd50316f8c29.pdf , paragraphs 0.16 and 0.23. The Colombian alternative is Article 9 of Ley 1556 de 2012, free full text at http://www.secretariasenado.gov.co/senado/basedoc/ley_1556_2012.html . All three are set out in Cases 1 and 5 and the cross-case synthesis of the Film industry playbooks research map.

First used in: 4.3 · Five countries, five different answers