Czechs Face Film-Financing Double Whammy as Tax Rebate Fails to Deliver, Local Fund Delayed

One measure isn't producing a promised 20 percent cash back as another awaits legal approval.

KARLOVY VARY -- Studio heads and film producers in the Czech Republic are being hit by a double whammy as a long-awaited tax rebate plan fails to deliver a promised 20 percent cash back and a new $10 million local film fund awaits European Union legal approval.

After years of lobbying for a raft of incentives to lift production services out of the doldrums that struck when Hungary’s groundbreaking 20 percent incentives introduced in 2004 robbed Prague of its status as central Europe’s low-cost production hub, Czech filmmakers are fuming at government incompetence and EU red tape.

The Czech Republic's much trumpeted tax incentive scheme, introduced three years ago, is consistently underfunded, producers say.

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“There should be a pot worth $40 million a year, but only $25 million has been approved this year, which means there is not enough money to go around for all the films that applied and won approval,” Pavel Strnad, of Prague’s Negativ Film, told The Hollywood Reporter.

Martin Sankot, deputy culture minister, promised to find a solution during a meeting with Strnad and other producers during the Karlovy Vary International Film Festival, which runs through Sunday, but so far the stop-gap measure has only been able to pay out 7 percent, rather than the promised 20 percent, to spread the money as far as possible.

The lower-level rebates, which production companies servicing international projects were banking on to increase workflow, have been paid to movies that applied this year including Ridley Scott's Child 44, which Barrandov Studios-based Stillking Film is producing.

Matthew Stillman, Stillking’s founder, estimates its international production spend is 15 percent of what it was in 2005 when Prague was the go-to capital for foreign movies.

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Added to these woes, a long-delayed measure to improve public funding for local films -- the Czech Film Fund, which finally won government approval last December after years of being vetoed by now ex-President Vaclav Klaus, who opposed film industry subsidies on ideological grounds -- has been waiting for formal permission to open from the European Commission’s competition authorities.

Under EU law, public subsidies must be approved to prevent one country gaining a competitive advantage over another.

The Czech fund is modeled on others in the region, including Poland's and Slovakia's, and approval should be a formality.

"We’ve been waiting six months, but are confident the green light will be given sometime this month," said Strnad, adding that local producers had endured a "funding gap" last year when the old public coin system, based on a TV advertising levy, gave way to the directly budgeted new system.

The advertising levy ended in late 2011 when a law banning Czech public television from carrying advertising came into effect. The new funding system, that draws funds directly from general taxation, was only approved in December last year.