Why Hollywood is losing the limelight

Spot anything about this year's nominees for Best Picture?

Three out of five Oscar candidates are set outside US borders. A fourth, Traffic, features scenes at the San Ysidro-San Diego border. Only one of the five films, Erin Brockovich, unfurls in the dreary old US. And this does not even count Cast Away, the surprise non-nominee that was shot on the Fijian island of Monuriki.

The foreign fad has a lot to do with the same breathless sort of escapism that has given us television's Survivor, and now Temptation Island. The American condition, after all, can be a boring one.

But the made-abroad trend also stems from some very uncinematic practicality. High labour costs, self-righteous unions and numerous taxes make shooting movies and television in the States expensive. Hollywood, after all, is situated in California, one of the most heavily taxed states in the nation.

The result is that some $10bn in such projects escape to more welcoming locations each year. Washington and the individual states do their best to win these runaways back. That $10bn figure was generated by a panicked Department of Commerce, which put out a whine of a report complaining about tempting terms on offer from foreign capitals.

Exactly how tempting those terms can be comes clear in a handbook produced by Ernst & Young just in time for the Awards season. The Guide to International Film Production: An Overview of Business and Tax Incentives* may sound dry, but its country-by-country breakdown provides important background for filmmakers. (So you already knew you wanted to shoot a surfing film on Tortola. But did you know you could do it without incurring income tax?)

Even more valuable, though, is the window this atlas gives into tax-and-break warfare as it is practised by that trade predator, the modern nation.

Consider Canada. While most Americans like Canada in a general sort of way, they do not consider it a competitor. In many ways, they are right: most taxes and regulations are much heavier in Canada than in the US.

But not those for the film industry, where Canada is a veritable tiger. For starters, Ottawa offers filmmakers a range of cash incentives unparalleled across the globe. If you're making a film about fractious Quebecois or the Dionne quints, or some other matter Canadian, there is the wonderful federal Canadian Film or Video Production Credit. If these topics do not charm you, you can still get a break, under a special arrangement for non-Canadian companies.

On top of this come bonuses from the regions, available almost exclusively to film or TV professionals. Thinking of a cartoon? Don't forget to consider the Ontario Computer Animation and Special Effects Tax Credit, which is even available for shorties under 30 minutes. You may have never thought of filming the Duck Mountain Loppet in Kamsack, Saskatchewan, let alone the Creighton Chilly Willy Winter Festival. But that was before you heard about the Saskatchewan Film Employment Credit.

The result of such advantages is that Canada regularly wins prize projects away from the Lower 48. Films with themes as seemingly un-Canadian as Clueless and Batman and Robin have been shot in Canada. Pricier New York has been shut out of the limelight, so that humdrum Toronto - how humiliating - could play the Big Apple in more than 100 film productions.

Canada, of course, is not alone in offering goodies. There is Ireland, which through low tax rates, valuable tax credits and the assiduous efforts of the Irish Film Board has drawn the makers of Braveheart and Saving Private Ryan. The UK is also a tax-and-break Gladiator, with a long tradition of wooing business through accelerated amortisation regimes.

To be sure, taxes and business breaks are only part of the runaway film story. In the case of Canada, for example, the lagging dollar plays a powerful role. Still, the competition assailing the US is more organised than it used to be - just about every self-respecting country now has a film commissioner.

California's sense of urgency is reflected in the fact that it recently started promoting a Film California First Initiative.

Such retaliatory escalation may serve the film industry, but is also fundamentally short-sighted. That is because for every gainer in the sort of tax warfare practised by nations on behalf of the film industry there is also a loser - what about all those Canadians, or Californians, or UK citizens who do not get the special breaks? But in the world of taxes, as in the Oscars themselves, a sad truth obtains: the winners hog the stage.

© Copyright 2001 Financial Times

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