Gov't mulls tax holiday, other incentives for film industry

The government is considering the possibility of adding show business in its investments Priority Plan (IPP), a move that will qualify the film industry to various incentives including tax holidays.

Following a meeting with some 40 industry organizations, the Department of Trade and Industry (DTI) said it is possible to add the film industry to the winners in the IPP list, putting it on the level of export-oriented industries such as electronics, garments and automotive.

Elmer Hernandez, executive director of the Board of Investments (BOI) said the film industry is lobbying for the creation of a council to coordinate all efforts and policies that would promote the viability of the film industry as one of the country's biggest money-making and employment-generating industries.

Hernandez said industry leaders have been lobbying for recognition as an industry with contributions to the economy and not "merely as a source of entertainment" since it is one of government's biggest cash cows.

Booked as an entertainment sector in the national accounts, the film industry is subject to amusement and related taxes, making it one of the most heavily taxed industries in the country along with alcoholic beverages, cigarettes and gaming.

According to Hernandez, the council would draw up the roadmap for the film industry and review all existing policies, including heavy taxation and possible incentives that could be made available to local film makers.

"We have to admit that the industry is in a vicious circle," Hernandez said. "About 50 percent of the income generated by one film goes to taxes and this means that film producers have to make do with a small budget and produce low-quality films in order to make money."

"Quality has costs that most production outfits cannot afford," Hernandez said. "If we cannot immediately do anything about government's taxation policies, there are available incentives that the industry could avail of."

Hernandez said industry leaders expressed their belief that the film industry has export potentials that have not been tapped so far.

Putting film and related industries in the IPP would qualify movie outfits to BOI incentives such as tax holidays, tax credits on capital equipment, waiver for certain government fees and charges as well as full and unencumbered use of consigned materials and equipment.

Data provided by industry leaders indicate that the average local film budget ranges from P8 million to P10 million. Half of this amount is spent on rental of equipment, salaries, fees and various payments to the crew, excluding actors. The other half is spent on post-production expenses such as developing, editing and marketing.

With the world market opening up more and more to quality foreign films, Hernandez said the Philippine film industry only needs government support to be able to become a major player. As it is, the Philippines already has the fourth biggest film industry in the world, after the US, India and Hong Kong.