Wellington mayor confident city benefited from 'Rings'

Wellington Mayor Kerry Prendergast is surprised by claims the Lord of the Rings (LOTR) film trilogy will be unlikely to provide a return on New Zealand taxpayers' investment.

The Peter Jackson-directed movies cost taxpayers millions through a loophole in tax laws that allowed producers to claim an up-front tax deduction for the entire cost of the three films.

The Government closed the loophole in 1998, but films that began production before that date were allowed to exploit it. Inland Revenue estimated the tax breaks had cost taxpayers about $400 million.

In reports from Treasury and Inland Revenue, obtained by the Sunday Star Times, officials told the Government it was "unclear whether any substantive profits will be returned to New Zealand" from the LOTR trilogy".

The reports also doubted Jackson's claims the films would not have been made here without the help from the taxpayer.

"If it is reasonable to assume that LOTR might have come without the prior tax treatment, then the net benefits to New Zealand would have been greater and the government subsidy provided to that film project could have been directed to other government spending," one briefing paper said.

But Ms Prendergast was surprised by the claims and believed Wellington at least had greatly benefited from the trilogy.

"I believe there is enough evidence to show that from a tourism prospective, Lord of the Rings has put Wellington and the rest of New Zealand on the map - in terms of this is the home of Lord of the Rings and Wellington is the home of Middle Earth," she said.

"From an industry perspective, the film industry, I think it has been phenomenal at showcasing New Zealand scenery to prospective producers and also showcasing the talent, particularly in post-production and special effects, of Wellington film makers."

Ms Prendergast believed the films' production had created about 3500 jobs for the area.

"What are we saying, that if Peter Jackson hadn't been here, there would have been another industry that might have grown that many jobs? I find that hard to believe."

She was fully supportive of the Government's $40 million a year scheme, introduced in June, that allows film makers to claim back 12.5 per cent of their costs as a grant upon filming completion.

The offer is open to productions with budgets over $50 million, or those between $15 million and $50 million that spend at least 70 per cent of their budget in this country.

"If we want it to be a level playing field so we are considered as a location of choice ... then I think it was critical that we offered that," she said.

Economic Development Minister Jim Anderton called the final value of LOTR tax breaks a "breathtaking bottomless pit".

"This was a tax avoidance scheme with loopholes so big there was room to jump through them," he told the Sunday Star Times.

He said a similar loophole could "never be allowed to happen again".

ACT MP Rodney Hide said the public had been hoodwinked into investing in a project that made billions for a Hollywood studio.

New Line Cinema gathered takings of about $3.5 billion worldwide for the first two LOTR films. The cost of making the movies was estimated at $675 million.

The world premiere of the last film, Lord of the Rings: Return of the King, is to be held in Wellington on December 1.

- NZPA

Herald Feature: Lord of the Rings