Banking on Hollywood

By PETER CALDER

Sure, the new Tom Cruise action film The Last Samurai was shot mostly in Taranaki - but that's news nowhere other than here.

Reviews of the period picture, which opens here next week, have been mostly charitable but few have made more than a passing mention of the location.

The Hollywood Reporter said the film was "shot mostly in New Zealand" and Variety went further, praising the New Zealand and Japanese locations, but none of the big New York and Chicago papers mentioned this country.

This fact will worry the Government not a bit. Our image abroad is one thing - when the Prime Minister appears next to Cruise on front pages, it doesn't do the country (or the Government's re-election chances) any harm. But the Minister of Finance and the boffins at the Treasury are interested in the bottom line. They know Hollywood travels with fat chequebooks.

A cool $30 million of The Last Samurai's $170 million budget went into the star's pocket, but plenty stayed here, too, rewarding local cast and crew as well as suppliers of everything from trucking services to rental homes. The gross income is taxed and what's left climbs on a money-go-round, generating GST when it's spent.

That explains why the Government decided to set up a scheme which effectively uses taxpayer money to subsidise Hollywood. The Large Budget Grant Scheme (LBGS), which runs for three years from last July, refunds 12.5 per cent of its local costs to any film production which spends more than $50 million here.

Films which spend between $15 million and $50 million here also qualify if the spending constitutes more than 70 per cent of the budget as a whole.

Taxpayers who worry about hospital waiting lists may wonder why we're helping Hollywood. But the scheme's political promoter, Minister of Economic Development Jim Anderton, says it's money well spent.

"You don't have to be an economist to work out that if someone is going to spend $100 million in New Zealand on New Zealand goods and services, we're going to do better than the 12 per cent we're giving back, particularly if the film wasn't going to come here anyway."

Samurai was always going to come here. The story required a mountain that looked like Japan's Fujiyama before the days of bullet trains, and Mt Taranaki, which fitted the bill perfectly, had the added advantage of being sited in a country full of good actors and film crews who cost a lot less than Americans.

The LBGS replaces a labyrinthine (and perfectly legal) scheme by which local financiers lent budgets to foreign studios - and obtained a tax deduction equivalent to the principal. Dr Cullen has repeatedly said that the cost to the New Zealand tax base of the scheme (which, incidentally, involved several films, including the Rings trilogy) was between $300 million and $400 million.

Peter Jackson sharply criticised the arithmetic in an interview with the film industry magazine OnFilm before Christmas, but Inland Revenue officials were this week standing by Dr Cullen, although it now looks like the cost will be at the bottom end of that range.

In any case, the tax regime which permitted wily investors to put money into film projects just to avoid tax, is history. Its replacement by the LBGS, says Anderton, gives us "a system which is much more transparent and easier to administer. They produce the receipts; they get the money."

But the LBGS, unaffectionately referred to in the industry as "the foreign devils scheme", has deeply angered local film-makers because they are - effectively if not theoretically - locked out. The $15 million bar is one no local film yet made would have cleared, particularly since Government (mainly Film Commission and Film Fund) money is not counted as eligible expenditure.

The lockout comes at a time when the star of New Zealand cinema is firmly in the ascendant. Basking in the reflected glory of Rings our film-makers can also take pride in the success of Whale Rider ($40 million and counting worldwide) and in a generally creditable slew of recent and upcoming releases.

The howls of outrage are notable for being in rare unison. All the industry guilds (writers, technicians, actors, directors, producers) have joined forces to urge that the scheme include local productions whose budgets don't reach the $15 million bar and that "cultural" (which is to say public) funding be counted in budget calculations.

A statement of support was signed by 20 local and overseas luminaries. Tim Bevan, the prolific British-based producer of such hits as Bridget Jones's Diary and About a Boy; Warriors director Lee Tamahori who helmed the last James Bond film; Roger Donaldson (Cocktail, The Recruit); and Jane Campion all signed on along with one Peter Jackson, Christine Jeffs (Rain), Ian Mune (Came A Hot Friday) and Vincent Ward (Vigil) among others.

Donaldson, who is trying to raise funding for a "smaller, concept film" set here but with a budget lower than $15 million, says the Government has "forgotten the movies which have been instrumental in putting New Zealand on the map.

"You need the production of these smaller movies to support the big movies, so they should also be able to access the grant scheme."

Geoff Murphy, whose anarchic road movie Goodbye Pork Pie was the first local film to make its (admittedly modest) budget back, has just finished shooting a thriller, Spooked, in Auckland. But he says that he almost shot it in San Francisco "rather than the country I had written it for" because funding was so hard to raise.

Meanwhile Ward, who has sweated blood to complete financing a period drama set on the Whanganui River, is writing a "very modest-budget film inspired by a whole range of things in New Zealand but I will likely set it in Australia".

And Bevan, whose 67 credits going back to 1985 suggest he knows a thing or two about stitching together a deal, says the exclusion is "a completely stupid [decision which will] handicap New Zealand films".

Even the most sanguine observer of the 1990s, when Northern Hemisphere film-makers began to arrive here, would not suggest the "foreign devils" are reliable economic saviours. Big-budget productions come and go, as the Australians have been finding. The rise of the Australian dollar has eroded the advantage of shooting there and an impending Free Trade Agreement may force them to drop the tax break (also 12 per cent) they introduced to woo Hollywood Downunder. Production dropped by 23 per cent between 2001-02 and 2002-03 and local feature production followed suit, dropping a whopping 63 per cent.

No matter how much the rich visitors may excite our policy makers, what will be left when they move on will be our own film industry, and critics of the Government's current policy direction say we may live to rue our munificence.

Says Whale Rider's producer John Barnett: "Unless you've got an active, vibrant domestic industry there is no point. If there is no domestic infrastructure there will be nothing for [runaway productions] to utilise. Sure, we can offer a 12.5 per cent rebate but what happens when Canada says 15 per cent next week? We're stuffed."

Proponents of the welcome-mat policy say it encourages skill development, but critics say the big shows starve the local industry by inflating rates and tying up crews .

It's an argument which doesn't cut much ice with Jim Anderton.

"The argument is a bit puerile. Peter Jackson jacks up the crew pay rates so we shouldn't have The Lord of the Rings here? I get a bit angry about that. There are young people - and I have personal experience of this because I had a daughter who was a film editor - [who] have been chewed up and spat out, have worked for 16 hours a day for practically nothing. It's been totally unfair.

"If anyone else did that they would get battered for it, and rightly so. The film industry shouldn't be protected from that. When I hear local film-makers say that it might put the rates up, I say 'good job'. Maybe people will earn more and stay here."

In fact, of course, New Zealand film-makers work in a climate of considerable financial support from the Government. They enjoy the right (accorded to no other industry except forestry) to tax-deduct production costs when the film is finished, rather than when the income arrives, which is typically several years later. And they are lent - by the Film Commission and Film Fund - money "at risk", which is to say that if their enterprise fails, they don't have to pay the money back.

That's a deal any small business would love to cut and, as an IRD official explained this week, a modestly budgeted local film stands to do better by those arrangements than by being included in the LBGS. Anderton is fond of overstating the extent of Government funding for film. He canters through lists which total $183 million for the present financial yea,r but more than $120 million is for local television whose commercial success depends on the sale of advertisements, not of tickets.

He also includes the $40 million earmarked for the LBGS, which seems disingenuous. At the heart of the argument is that local film-makers are talking about a cultural spin-off - the inchoate and hard-to-measure effect of seeing ourselves on screen - and the politicians are counting the dollars. Anderton is happy to reimburse 12 per cent of $170 million, but not of $5 million, especially when 40 per cent of it was public money to start with. If the playing field seems less than level, he's unrepentant.

"The only reason we subsidise Warner Bros is if there is an economic benefit," he says. "I will subsidise the devil incarnate if there is a net economic benefit to New Zealand.

"But it's a large-budget scheme. It's not worth doing unless you're dealing with one agency and one big heap of dough. It's not cost-effective."

It's a bitter irony for Vincent Ward who developed, under the title West of the Rising Sun, the story that eventually became The Last Samurai. He's still scrabbling for completion finance for his Whanganui project while it looks as if Warner Bros, who finally made the Cruise film, will get a $3 million golden handshake. Even though they were always going to shoot here and had finished shooting by the time the LBGS was announced, the Government has agreed on an ex gratia payment once the paperwork is finished.

Little wonder then that Ward chuckles a tad bitterly at a legendary remark attributed to an Australian member of the crew on Moulin Rouge, which was made in Sydney.

"If you're not the lead dog," the man is reported to have said, "the view remains remarkably the same."