Czech industry decries lack of new incentives

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KARLOVY VARY, Czech Republic -- Czech producers have issued a warning that the country's homegrown features and international film service industry could collapse unless political leaders introduce a system of tax incentives such as those offered in neighboring Hungary.

The bleak warning came a day after film industry leaders hammered out a provisional stop-gap deal to increase public subsidies for Czech productions by diverting state television advertising revenues for the next few years late last week.

That deal should get parliamentary approval next month but does not address wider issues including tax breaks for film production.

Film industry leaders on Friday urged Czech lawmakers to recognize the critical importance of tax incentives in worldwide film production and include a 20% production tax incentive in a draft cinematography law that is to be put before parliament.

Without it, the Czech Republic's long run as a top European destination for Hollywood could come to a grinding halt, they said.

"If the cinematography law (including a tax break) is not ready by January 2009, I think the industry here could collapse within two or three years," Radomir Docekal, managing director of the Czech Audio-Visual Producers Assn., said at a meeting hosted by the 42nd edition of the Karlovy Vary International Film Festival.

New Line Cinema's Nicole Kidman starrer "The Golden Compass," due for a December release, already had paid a deposit to block out studio space in Prague when the production was pulled back to the U.K. for cost reasons, Docekal said, attributing U.K. tax incentives as a key factor in the decision.

Petr Keller, managing director of Prague-based Starlite Prods. and the local executive in charge of production when Guillermo Del Toro's "Hellboy" shot at the city's Barrandov Studios three years ago, noted that the movie's sequel, "Hellboy 2: The Golden Army" did not return to the Czech Republic.

The sequel started shooting at the newly opened Korda Studios near Budapest in Hungary early June.

The developers of the new Korda Studios acknowledge that the recent introduction of a 20% tax rebate on all in-country film production spend in Hungary for local and international productions was the deciding factor in moving forward with the $127 million filmmaking complex.

Czech producers say that financial figures over the past five years suggest that Prague's once prime position as a cost-effective and film-friendly destination for international productions is rapidly eroding.

Directly attributable production spending in the Czech Republic in 2003 totaled 7.6 billion Czech crowns ($360 million at current exchange rates). By last year, that had halved.

Spending by foreign productions over the same period dropped from $238 million to $65 million at today's currency exchange values, according to APA statistics. Docekal said Czech government leaders feared tax breaks would sap money from the overall national budget and may run into trouble with European Union fiscal rules. He dismissed both anxieties -- pointing to the Hungarian scheme and others in the economic union.

Helena Uldrichova, chairwoman of the Czech Film Chamber -- an APA-backed body that represents film industry interests in the Czech Republic -- said there were already signs that economic pressures were leading to a "brain drain" of technical and production talent to Hungary.

"Czech (production and service) companies are opening Hungarian offices. There are real dangers. This is a real problem," Uldrichova said.
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