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Tax helps break new ground

DID anyone notice a bit of news floating around last week that Australia’s film-making industry was doing well on the back of a clever tax deduction.

A report prepared for the Federal Department of Communications, Information Technology and the Arts says the tax incentive is to a large degree responsible for film-makers choosing Australia as a cheap alternative to Hollywood. The tax break makes it 7.5 per cent cheaper to make a big-budget film here than in Canada, the biggest rival market.

For example, a $34 million budget flick will save a little more than 10 per cent of this cost by coming to Australia and taking advantage of the tax rebates available, well and truly outdoing the savings offered by the Canadians.

In the example given the saving was about $1.6 million.

While the report doesn’t go into what impact this has had on the local industry, the anecdotal evidence is pretty clear.

Australia is increasingly home to big budget film productions.

About one third of all Australian film production is offshore foreign dramas; and that is a growth market.

The irony is that Australian wages are higher than those of the Canadians, so what the Australian Government gives to the financiers, it takes back in part as PAYE.

So, in summary, tax breaks have helped win business for Australia and generated growth in a selected area of the local economy. To put it more simply – lower taxes have stimulated economic activity.

Now there’s a surprise.

While many people argue against these targeted applications of tax incentives, I love them because they prove that lower taxes provide all the incentive people need to shift economic spending – whether its domestic or offshore.

Of course it’s ridiculous to target one segment of the economy when every part of business should get this.

The argument for tax incentives in film is flawed but the result is a terrific example of what could happen if we started getting competitive on tax.

Films get tax breaks because it’s supposed to help keep our cultural identity. But tell me which bit of The Matrix sold Australia to the rest of the world?

Basically, making films is just an upmarket version of producing Nike shoes, it’s cheaper to do it offshore but no-one really notices the differences, although a few visiting Hollywood stars helps make Sydney feel like a global capital.

The point is that selecting the film industry for special treatment is spurious.

All industry should be given this ability to compete globally, and domestic producers should have the same economic incentives to compete for capital and generate economic activity.

Then we’d see more than a couple of hundred million dollars worth of film-making every year.

Get government to the party

I WAS glad to see the Methanex project proposed for the Burrup inching closer to receiving the green light.

But the issue over Federal Government infrastructure funding leaves me in two minds.

Firstly, it is difficult for governments of all shades when every development project puts its hands out for assistance, especially if other projects have gone ahead without such support.

Then again, the Federal Government reaps the rewards of royalties from gas production and income tax on workers, so why shouldn’t it come to the party when it comes to downstream processing?

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