LOS ANGELES — To see how Hollywood has turned Germany’s — and
Europe’s — crusade against so-called American cultural imperialism
to Tinseltown’s Titanic advantage, check out The
Punisher, the action film based on a Marvel Comics comic
book about a vigilante antihero.
Featuring the raffish American John Travolta as an underworld
crime boss and shot in sunny Tampa, Florida, it was co-produced by
Gale Ann Hurd, the mastermind behind the Terminator
trilogy and will be distributed by the Canadian-American Lions Gate
Entertainment and Japanese giant Sony’s film division. Yet German
taxpayers will foot part of the production costs for the film,
which comes out this month, thanks to a film fund, a German
government tax shelter originally set up to promote local
filmmaking.
Along with McDonald’s restaurants and Levis jeans, American
entertainment has long been blamed by Europe’s political and
intellectual elites for imposing a “cretin” culture and weakening
native cultures. That consumers actively seek out and enjoy Mickey
Mouse and other Hollywood fare doesn’t seem to register.
Neither does the reality that Hollywood recycles as many
European cultural staples — think Cinderella, Tomb
Raider, and Harry Potter — as it exports all things
American. Among the top film directors are German native Roland
Emmerich of Independence Day fame and British-born
Anthony Minghella, whose Civil War epic, Cold Mountain,
was shot in Romania.
TO BOOST LOCAL PRODUCTION and film culture, Europeans have created
a dizzying array of subsidy programs and tax breaks. The European
Union alone ladled 1 billion euros to film projects in 2000.
Countries such as the Czech Republic have also enticed American
producers with rebates on costs from using native-born cast members
and crew. Theoretically, local talent will apply the expertise and
exposure they gained from American filmmakers and apply it to
fostering native film sectors.
Then there are film funds which allow local film producers to
gain another subsidy while allowing wealthy taxpayers to avoid
Europe’s notoriously high income taxes. First authorized by the
German government in the 1970s, they have become a sweet form of
film finance: British funds alone have raised $7.2 billion for film
and television production between 2001 and 2003 according to Martin
Churchill, the editor of the Tax Efficient Review, a newsletter on tax
shelters, and the co-author of an upcoming book on what he aptly
calls “tax schemes.”
Structured as sale-leaseback partnerships, the funds buy the
copyrights to a film from a filmmaker, becoming the “producer” of
the film. Not that these funds or its investors actually have much
say in casting and set designs. They simply lease the rights right
back to the filmmaker for 15 years in exchange for a steady payment
stream and the chance to immediately write-off their
investment.
Theoretically everyone gets a good deal, especially the
taxpayers and the native culture, which benefit by having a vibrant
film sector. “If done right, it can really work out for everyone,”
said Churchill in an interview last year.
But German and British officials forgot about Hollywood’s talent
for using other people’s money without giving back much in return.
These days, tax deals, such as those provided by New Zealand to
finance the Lord of the Rings trilogy, are as much a major
consideration for film studios and producers in getting a
production off the ground as distribution deals, bank loans, and
equity investments.
OF COURSE, HOLLYWOOD DIDN’T have to dig too deep for the loopholes.
Germany, for example, doesn’t even require the films to use native
actors or shoot scenes within its borders. Britain requires that 70
percent of production has to take place within its borders, but
producers can deftly skirt this and other rules if production is in
countries with so-called co-production treaties with UK, such as
Romania — where production costs are cheaper — or in Canada, the
motion picture industry’s foreign locale of choice.
Paramount Pictures became the first to exploit these tax
shelters during the late 1990s when it raised $130 million through
a German film fund to finance a slate of films including
Mission: Impossible 2. The other studios soon followed
with a series of German and British funded flicks, including
Travolta’s Scientology-inspired dud, Battlefield Earth,
The Fast and the Furious, and Lara Croft Tomb Raider:
The Cradle of Life.
For Hollywood, it’s been like dollars from heaven. As for
Europe’s filmmakers and taxpayers? A box-office bomb. While some
European-oriented films, such as the period piece Girl with a
Pearl Earring, have done decent business, American films still
dominate European theatres. Last year American films commanded 90
percent of Britain’s box office gross, according to
Variety.
The failure of European films to catch fire, along with mounting
budget deficits, have now forced some Europeans to reconsider their
efforts. German tax officials essentially shut down its
film-financing industry in 2002 by announcing it would apply new
restrictions; it has since turned the spigot back on with few
changes. British officials got even tougher in February when the UK
outlawed one form of film funds — which sent the producers of the
Johnny Depp film The Libertine scrambling for funds —
then took a further step against Walt Disney Co. and the other
major studios last month by banning another tax shelter used to
defray marketing costs.
Loopholes can only be tightened so much, however. As long as
Europeans are determined to subsidize alternatives to American
movies, Hollywood will find a way to get at that money and continue
to play them for saps.
