(More on the revisions to the Royal Decree setting out the Implementing Regulations to the Film Industry Act)
Rounding out a month in which the movie industry has been much in the news with Spain’s Goya Awards still fresh in our minds, the Government has today set in motion a public consultation regarding amendments to Royal Decree 1085/2015 of 4 December 2015 with the Implementing Regulations to Law 55/2007 of 28 December 2007 on the Film Industry.
The Royal Decree is the cornerstone on which the entire regulatory system for the motion picture industry in Spain rests, encompassing (naturally), the basis for public subsidies but also many other questions as well, such as the procedural methods of advisory bodies and oversight by the Instituto de la Cinematografía [Film Industry Institute], the system of penalties, the audiovisual content rating system, and a long list of other aspects.
Turning to the text that has today been made available for public consultation, open to all citizens until this coming 19 February, what we have is an update to the law, given that the original law dates from 2007, a little over 12 years ago, ancient times in an industry that is continually reinventing and upgrading itself.
The new revision is not a complete overhaul but merely retouches a few articles in the 2015 version. In fact, many of the changes are more formal than substantive or are the result of legislative changes since the original Royal Decree was issued and which would be applicable even without this new version. This is the case, for instance, of the references in the new draft to Law 39/2015 on Administrative Procedure in Article 4.2 or to Law 40/2015 on the Public Sector in Article 36.
Still, there are some much needed changes that have been pushed along by practical necessities. One example is Article 10.3 in the draft, dealing with co-productions. The current version of the law requires all formalities in this respect to be completed before a production starts shooting. This means that, as a result, the producers cannot have recourse to funds from foreign co-producers interested in taking part in the project, which on some very noteworthy occasions (fortunately few in number) keeps projects from ever getting off the ground. Quite reasonably, the law contains an exception to the general rule, allowing co-production financing to be approved after filming has begun.
As might be expected, the lynchpin of the revisions is Article 21.2 of the draft, which regulates limits on government grants. These limits determine the amount of public funds that can be put into audiovisual projects, already set previously by the European Union. However, it is up to each Member State to define the content of what can be regarded as “problem” projects, that is, projects which have more restricted commercial appeal, which encounter greater difficulty in obtaining financing, or which without additional public support would be destined to be shelved.
The definition of a problem project varies greatly around the European Union and allows any given Member State to give certain types of works extra protection and fund more than the 50 % cap commonplace in the industry. Each country, of course, has come up with its own definitions, resulting in a sort of minor “arms race” in this area.
Spain was not particularly audacious in its definition of problem projects in the 2015 version of the law, which was not very helpful to writers and producers, who have to compete with other, bolder European countries, compelling Spanish film industry producers to limit the size of their stakes and expand production stages in search of financing, lowering competitiveness in attracting shoots (with the resulting cost in jobs), etc.
The inflection point in this particular race came about in Italy, which two years ago brought in a package of regulations that substantially modified the rules of its own domestic scheme (based on the French system, by the way). The new regulations defined a problem production as any Italian production costing less than 2.5 million euros and allowed public financing of up to 100 % of those projects. This was on top of a quasi-automatic system of grants, a strong tax incentive structure, and a 60 % increase in public funding for the industry, climbing to 400 million euros. Far more than in Spain, which expends barely 70 million nationally.
The revision that is now being planned is not the remedy on the Italian model and is far removed from the French system, but it does include improvements that will make it possible to support particularly vulnerable projects which up to now have not benefited from any special protection. These include measures aimed at people with disabilities, women, and projects of special cultural and artistic value that need extra support.
Even so, the changes only go halfway. Apart from the efforts that approving the law in question surely entails and will require on the part of the Government, it represents the lonely voice of the Ministry of Culture. It is commonly accepted that as things stand today the audiovisual production system would not be able to keep up its current pace without the system of financial incentives, which paves the way for private financing and makes our country attractive to foreign producers.
To be fully effective, the changes now being proposed need to be co-ordinated with the specific tax legislation previously referred to, including Article 36.1 of the Corporate Income Tax Act. Otherwise, there will continue to be two separate playing fields, one tax related, one regulatory, which definitely need to be reconciled in order to create a consistent, secure legal structure for the industry.
Author: Mabel Klimt
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