Cape Town - The South African film industry was at last beginning to gain local and international recognition, but it needed more tax breaks, it was claimed yesterday.
David Wicht, of the Independent Producers' Association, told the portfolio committee on finance that it usually took up to 15 years to realise any profit on a locally made film and the industry should be allowed to enter 15-year sale and leaseback agreements to finance films.
It should also be allowed to exclude from the 75 percent of production costs that had to be incurred in South Africa before a film company could benefit from present tax incentives the cost of recruiting up to four "stars" to give work international appeal.
The committee was hearing evidence on the draft Revenue Laws Amendment Bill, which encapsulates all tax changes made this year.
Wicht said section 24F of the Income Tax Act, which was aimed at attracting private equity finance into the film industry, had so far failed to "attract any significant private equity into the film industry".
As a result, South African films "do not have a track record of international earnings and profitability ... are considered an unknown and exceptionally high-risk investment".
What was needed was greater tax certainty, especially if the SA Revenue Service (Sars) accepted legitimate attempts by investors "to enter into arrangements that would create more income certainty without losing the section 24F allowance".
Various film makers had tried to reduce the risk by having co-production arrangements with financiers in Canada, Italy and Germany that would give them "some income certainty", Wicht said.
In films not produced under a co-production treaty, Sars should consider allowing producers to treat the generally high salaries of foreign stars as part of the 75 percent of production costs that had to be spent locally before tax incentives were granted.
Costs incurred by making films with other Southern African Development Community countries should also be regarded as "local costs" to help develop the film industries in those countries.
Wicht said the Independent Producers' Association "strongly supports" any amendment in the Revenue Laws Amendment Bill to section 24F that would eradicate abuses, "but we believe that it is vital that this is balanced with realistic amendments that encourage legitimate financing arrangements appropriate for the high-risk nature of the investment".
Extending the time limit on sale and leaseback agreements used to finance films from 10 to 15 years would give film owners and Sars greater income certainty over the loan period.