Monday, June 25, 2012

Fessing Up

Like the comedian Jimmy Carr, I too have to fess up.

You know all those dodgy investments in the film industry? The ones where people make loans to movies that are never going to make money, and get massive tax write-offs? The schemes where footballers, tycoons and comedians avoid paying the same tax rate as poor people? Well, I’m just a teeny bit responsible.

20 years ago, I was surprised to find myself elected chair of PACT, the trade body representing Britain’s film and television producers. This surprise was derived from the fact that, although I had a certain amount of experience in television, I had no track record in cinema. Like any movie-goer, though, I was concerned about the moribund state of our industry: around 95% of films in our cinemas were American and only a handful of low budget British arthouse films managed to make it to distribution each year.

It wasn’t for lack of talent: Hollywood was full of British technicians and actors, while the industry back home was on its last legs. This was culturally disastrous, so I asked my film colleagues how to get British films kick started, and they unanimously replied: “tax breaks”. They needed new sources of external investment, and were lobbying government for incentives to persuade companies and rich individuals to back them. The producers wanted to make commercial movies, and maybe get rich in the process; I thought it a good idea because I didn’t want my children being brought up on a diet of Americana.

But PACT knew that neither case would wash with government. What we needed was a good financial argument that commercial British films would be good for Britain. We worked out that £20million in tax breaks would generate hundreds of millions of extra revenue for Britain through the employment of crews, the technical services and studios, the hotels and restaurants in the locations we filmed in, and, ultimately, the revenue that returned through tax on profits. Surely it was worth a little tax concession to get the ball rolling?

So we started a campaign. It was called Impact, and we launched it at a rather grand breakfast in London’s Savoy Hotel. Like any celebrity event we got plenty of publicity – I was even grilled by John Humphrys on the Today programme about why on earth we luvvies should get special treatment. To the Tory government of the day our campaign fell on deaf ears. So instead we targeted Gordon Brown, and built a robust financial model to prove the case.

Four years later our tax breaks were one of the first things he announced as the new Chancellor. The extraordinary thing was, it worked. British films thrived and money flowed into Britain. There was one problem: a lot of individuals who didn’t really have the film industry at their heart jumped on the bandwagon and created schemes solely for the tax breaks. And then persuaded comedians and footballers to put their money in. And they still do. Sorry about that, everyone.

Of course, one of the reasons people use these schemes is because our British tax system is so darned complicated. I count myself as reasonably intelligent and numerate, yet every year when my accountant sends me my tax return with a letter saying “Please check the contents and, if you are happy, sign”, I’ve never been able to understand a single word it says. So I trust that his substantial fees reflect his genius for doing what is right and legal, and I sign anyway. Which is presumably what Jimmy Carr did. Except it wasn’t right, was it?

Britain would probably be a lot better off if we just simplified the whole process. Let’s have a £10,000 tax-free allowance for everyone, then a single 30% tax rate, withheld at source, for wages, services, businesses, investments, everything. Meanwhile, scrap stamp duty, inheritance tax and other unnecessary complications. Of course the result would be thousands of redundant tax inspectors and accountants. Maybe they could set up a film company? They could call it ‘21st Century Tax’. Somehow I doubt they’d find any investors.

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