This week, Neil Calloway looks at cases of the misuse of tax incentives in film…
The tax incentives offered by various countries, and some US states, to film and TV production companies have been a good thing. Maybe not in if you live in Los Angeles, which has seen a decline in projects being shot there in the past few years, but it means films are as likely to be shot in London or Hungary as Hollywood and your favourite TV show is probably now shot in Baltimore or Louisiana rather than a sound stage in California.
However, these tax incentives have not always been used to invest in films for the right reasons. Last week, members of one British film investment scheme were reported to be ready to settle a legal battle, paying the UK tax man a massive £1.5 billion, enough to pay for the next few instalments Star Wars or Marvel movies, if the government wanted to use the money for that instead of paying off the national debt or solving the housing crisis.
The scheme was set up so that investors would pool their money to buy the rights to films such as Pirates of Caribbean: Dead Man’s Chest, or the Disney film Enchanted, then lease those rights back to the original owner, and using legal loopholes and tax incentives, lower their tax bills. It sounds nice, until the government decide that you’re not doing it for altruistic reasons and to invest in films that you love, hence the long legal dispute and the proposed settlement.
This case is not the first time British film funding has fallen foul of the law. In 2013, the film Eldorado (also known as Highway to Hell) achieved notoriety when the writer/director Richard Driscoll was jailed for fraud related to the film. Starring Daryl Hannah, David Carradine and Michael Madsen, as well as British stars Rik Mayall and Sylvester McCoy, the film had the makings of a successful straight to DVD horror comedy, with the added “bonus” of it being David Carradine’s last film before his death. Driscoll was found guilty of falsifying the budget of the film in order to claim back taxes on it. Claiming it cost £15 million, it actually only cost a tenth of that. He may have got away with it had the invoice he produced for Carradine’s work on the film hadn’t claimed that he’d shot his scenes after he died. Driscoll was sent to prison for three years, giving him plenty of time to write his next feature.
The story of a film that didn’t exist, and was only created to commit tax fraud, before being subsequently shot quickly to cover up that fraud, going on to win an award at a festival, is something out of a movie about con artists, but that’s exactly the story of the appropriately titled A Landscape of Lies, released in 2011. With a claimed budget of almost £20 million, it actually cost less than £100,000. As a British film with a budget lower than £20 million, the producers can get a rebate of 25%. You can do the maths; claim you spend £20 million on a film, and you can claim back a hell of a lot more than £100,000. The paperwork for the film claimed they had spoken to Richard Burton about appearing in the film, quite a coup, given that he died 25 years before the film was made. After being investigated, the producers quickly made the film cheaply, in an attempt to prove it actually existed. The authorities saw through the landscape of lies, and the producers were jailed. The story will make a good film one day.
These amusing anecdotes hide a real issue; it’s one thing to change the location of a film to take advantage of tax incentives, as has happened with the forthcoming Ryan Reynolds film Criminal, which switched locations from Washington to London because it was cheaper to film there, but it is quite another to invent a film to scam the tax money back.
The British film industry needs investment outside of the usual sources of the BFI, the BBC and Channel Four. Private investors should be encouraged and given incentives, but not if it means people will exploit those incentives. Cases like those outlined above may lead to a tightening of regulations and British films may find it harder to get funding. If that happens, we know who to blame.
Neil Calloway is a pub quiz extraordinaire and Top Gun obsessive. Check back here every Sunday for future instalments.
Originally published May 31, 2015. Updated April 14, 2018.
