The film production world is shaken to the core by the plan of the Trump administration to draw the US film industry back to the United States by interfering in the international system of tax incentive schemes. How do these plans relate to the incentive measures for the European film and TV production sector?
The international film production ecosystem is closely linked to the tax policies of countries eager to attract production. The reasons are both economic and cultural: film productions are large projects that can have a big impact on the economy of a region. Each film that is shot relies partly on local studio facilities, crew, catering, post-production and other services. Therefore, many countries offer tax incentives to film producers to attract such projects and secure employment and revenue. Besides, the cultural impact of the film industry is enormous. It is not for nothing that Trump refers to propaganda: what he sees as the ‘leftist’ Hollywood productions are a thorn in his flesh. A cultural ’test’ that determines whether or not films are eligible for a support measure can lead to it that more films will be produced that paint a different picture of the USA, a picture in line with how Trump see the USA (in short: the Trump gaze).
Both big streaming parties and Hollywood studios eagerly use the international options of limiting the costs of productions, since LA is a relatively expensive location. Much production of ‘American’ films is therefore happening in whole or in part outside the United States, and countries are competing for big projects. This problem can be addressed in part by introducing an American or Californian tax incentive, which would transform LA into a competitive film location again.
However, the plan of the Trump administration to keep the film industry at home goes far beyond that. In this plan not only a federal tax incentive is proposed, but also the reinforcement of the position of American producers by denying big streaming parties the right to buy off all rights to a production once and for all. This would lead to it that US producers, not US streaming parties, would partly keep the rights to films. Officially Trump is trying to kerb the power of big distributors with this measure. In addition, the plan introduces a cultural test that determines whether a film is eligible for support. The idea behind this seems to be “the more American, the better”. Finally, the plan mentions a tariff on films produced abroad: if a film has profited from a tax incentive outside the US, 120% of that amount will levied when the film is made public in the US – directly cancelling out the advantage for the film maker.
Elements of the plan of the Trump administration have been present for years in the policies of many European countries – see also our previous post on the French investment policy. Many countries are trying on the one hand to attract production through tax incentives, and on the other hand oblige investors to produce content while rights remain with European producers to a certain extent, and cultural tests determine whether a film ‘counts in’ for local investment obligations. These European rules that oblige large US streaming parties (among others) to invest locally in European content have been a thorn in Trump's flesh for a long time. It is therefore impossible to see the recent plans of his government apart from European developments in this field (or from the import restriction on American films that China has given notice of in response to the trade tariffs announced). European counties are expected to respond by tightening rules that oblige American streaming parties to invest, first of all by reopening the Audiovisual Media Services Directive (2018/1808/EC), which lays the foundation for national support measures. It will have to be monitored at all times whether this is permitted, including according to the European rules for state support. The EC Cinema Communication, in which a policy was set out that determines to what extent countries can subsidize production within their borders, has been due for renewal for a long time and may offer the European Commission room to respond. Parties producing and disseminating content on an international scale will have to find their way amidst all protectionist unrest, and may only find out in a few years where they stand financially.
