Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

I move amendment No. 53:

In page 84, between lines 36 and 37, to insert the following: "Reports

34.Within 3 months of the passing of this Act, the Minister shall produce a report on amending the guidelines in relation to section 481 (Film Tax Relief), to clearly define the requirement for producer companies in receipt of the relief to be the legally responsible employer for all those working on film productions funded by the relief as against the DAC which only has a temporary existence; and further to guarantee the full vindication of workers rights under the Protection of Employees (Fixed-Term Work) Act 2003; and further to ensure genuinely equitable remuneration for performers and actors in relation to their intellectual property rights and full compliance with the EU copyright directive.".

This amendment relates to an issue that we have discussed in the context of quite a few Finance Bills, namely, the section 481 film tax relief. It is also an issue that I got the agreement of the Committee on Budgetary Oversight to look at. I am glad that committee is looking at it and that examination is under way.

Section 481 is a film tax credit which, according to the latest figures - although I am open to correction by the Minister - is running at almost €100 million. The stated objective in respect of the relief is to stimulate the Irish film industry and, specifically, to create quality employment and training. It is stated in the statutory instrument arising from the section 481 legislation that it is supposed to create quality employment and training, and to contribute to Irish culture.

It is also worth noting that this relief is a form of state aid. As the Minister will be aware, when state aid is given, under EU rules, it is supposed to comply with EU directives that relate to state aid and, in this case, it is supposed to relate to arts and culture. The EU is quite particular about those sorts of matters and about them being the conditions under which such relief is given.

I stress, as I always do when I discuss this matter, that I want to see even more investment in the film industry and in arts and culture generally. Our investment in all arts and culture is far too low for a country that has so great a pool of creative talent in a range of arts and cultural disciplines and endeavours and such an incredible, unparalleled international reputation for these fields such as literature, acting, art, theatre, poetry and music. Across the arts and cultural disciplines and endeavours we have, deservedly, a fantastic reputation, tradition and history, but we do not match that with the level of investment we should, generally speaking, and overall, investment amounts to 0.1% of GDP whereas the EU average is 0.6%. The EU average investment in arts and culture is six times what we invest, so we do not do enough to invest in the arts and we should honestly think about that. We often pay lip service to arts and culture, particularly when we have an international success or success in a given area, but it is then sort of forgotten about and it drops to the bottom of the list of priorities. That has improved somewhat over recent years, although not, interestingly, in this year's budget, where the arts and culture budget was cut, not by a huge amount but it was cut nonetheless. I hope that is not a reversion to type and to the sort of disregard we have shown, at least in terms of money and investment, in arts and culture in recent years. I want to see us get up and I want to see much more investment. It benefits us, spiritually, personally and culturally, in areas such as employment and in the wider economy.

It could contribute even more in all those areas if we took it seriously but - there is a big "but" in respect of section 481 - is section 481 meeting the objective we have set for it to contribute that high-quality employment and training, to contribute to our culture and to comply with all those sorts of EU requirements on aid of that sort, which echo the requirements within the legislation and the statutory instruments that govern it? To give a flavour of the EU directive on state aid in this area, it states it should aim to "generate the critical mass of activity that is required to create the dynamic for the development and consolidation of the industry through the creation of soundly based production undertakings and the development of a permanent pool of human skills and experience." That is the requirement of state aid in this area. I underline that it refers to "soundly based production undertakings and ... a permanent pool of human skills and experience."

What actually happens, given that is what that section is supposed to achieve and, indeed, what it is required to achieve under EU directives? Quite honestly, my next step, if we do not move this forward, is to go to the European Commission because that is where it will have to go if we do not start to meet these objectives. The evidence that it is not meeting those objectives involves quite a long saga. For me, it began in 2018, when representatives of the film industry groups such as Screen Producers Ireland and the body now known as Screen Ireland appeared before the then Joint Committee on Arts, Heritage, Regional, Rural and Gaeltacht Affairsand outlined that there were 17,000 jobs in the Irish film industry, that section 481 was brilliant and that we should not change a thing. In fairness to the Minister, he responded to some of the arguments I made. I was no expert on this; information was brought to my attention by film crew people who worked in the industry, through evidence given at those arts committee hearings in 2018 by Irish Equity, which was asked questions such as whether there was blacklisting, the answer to which was "Yes", and by film crew to the effect that there was not high-quality employment and training. They stated that, in fact, what happens if people do not toe the line in the film industry is that they are not re-employed and are blacklisted. They argued that the DAC structure set up for film productions by film production companies, which receive the section 481 tax relief, had become a mechanism behind which producer companies and the recipients of section 481 relief could evade their responsibilities and obligations to people who worked in the film industry, thereby denying them the high-quality employment and training that are a requirement and ensuring there would be no "permanent" pool of human skills and experience, because the DAC appears for the film production and, like a mushroom, disappears shortly afterwards, 18 months later.

I want to underline this point to the Minister after hearing all the evidence given by both the defenders of the status quo and the critics of section 481, whether aspects of it or all of it, in any shape or form, including Irish Equity, whose representatives appeared before our scrutiny committee recently. That structure means that if somebody works or is a trainee on a film production that is funded in this way, the recipients of section 481 relief, namely, the producer companies, can deny the existence of an employment relationship between the producer company that receives the relief and the people who work on the film production. They can deny, and do deny, any existence of it because they, who receive section 481 relief to create high-quality employment and training, are not the employer, or at least they say they are not.

This was confirmed both by the critics and the defenders of the status quo. It is the DAC. How does someone vindicate their rights, which they are required to do, including by the declaration that the Minister brought in? In fairness, he brought it in on foot of some of the representations that were made. The declaration that section 481 recipients are required to sign is there in front of us, and it refers to undertakings in respect of quality employment, the name of the company, the name of the qualifying company and the requirement to meet all of the relevant legislation, EU rules and regulations around the organisation of working time, employment equality, payment of wages, the Protection of Employees (Fixed-Term Working) Act, and so on.

If a person is unfairly dismissed from one of these film productions, given the particular nature of the Irish film industry, or maybe any film industry, it works slightly differently from how it might in the context of any other employment. In any other employment, a person is told “We are sacking you” and the person can then take a case to the Workplace Relations Commission, WRC, in the following weeks or months. However, if someone is unfairly dismissed from a film production, this is the way it works. Most likely, the person works for the entirety of the film production and they are dismissed because they have perhaps been a bit troublesome or have been giving out about the excessive hours - because they are working 60 or 70 hours a week - or because they are not getting their holiday pay, sick pay or whatever. If some of the person's rights are being breached, the production company just will not employ him or her on the next film production, which might be a year or a year and a half away. That person does not know they have been unfairly dismissed until the next time, when that same film producer, but now with a different DAC, makes the next series or episode of a series. The worker goes back to that same film producer and because the next series is being made, they expect they are going to get a job, but they are just told that they are not getting a job, or they are ignored. However, quite a long time will have elapsed and although it is the same producer company, it is a different DAC. When that person goes along to the WRC maybe a year and a half later and says “I have been unfairly dismissed”, the producer company comes in or, as is often the case, refuses to come in, and says “I am not coming into the WRC because I am not the employer”. It is the same producer company for series A and series B, and the same recipient of section 481 relief, but a different DAC. However, when a worker on a production says “I was unfairly dismissed” by the same production company that is now doing production B, the company says it is not the employer and that the DAC is the employer, but that DAC is gone. The person has no employer and there is nobody to take a case against for unfair dismissal. Therefore, the rights which this declaration says must be vindicated cannot be vindicated. That is a problem, and there is nothing to protect workers against it.

Many workers say that this type of blacklisting goes on. We heard about this from Equity in 2018 and from the Irish Film Workers Association. The vast majority of the people in the latter have not worked in the film industry since they came before the joint committee. They are taking case after case to the Labour Court and the WRC, where the producers involved do not bother to turn up and simply deny that they are the employers. If they do turn up, they say that they could have no possible employment relationship with the person involved because the relationship was with the DAC, not them. Even though that individual set up the DAC, they can say that they set it up but now have nothing to do with it.

This is allowed to happen even though the requirement relating to this relief involves the provision of high-quality employment and training. These two things are not compatible. We cannot say that we are giving someone money for quality employment and training and then have the type of scenario to which I refer play out again and again. The Minister might say it is up to the WRC to sort out, but the problem is the structure of the relief, which was confirmed even by the representatives of the producers. When I put this to them at the joint committee, they said the structure of the relief requires this and that it was not their fault. I do not buy that, but they do have a point about it being structured like that because it is not clear that the person who gets the relief, that is, the production company, has and should have legal responsibility. That should be clearly defined by the Minister. Even if the DAC is gone, the producers have legal responsibility because if they do not have legal responsibility for quality employment and training and the vindication of the rights of the employees who worked on it, who does? The answer is that if they do not, no one does. Therefore, it is not possible to meet the requirements set down in law and in the EU directives.

There is no protection against the situation I have described. The Minister can explain to me how there is a protection, but this is not about the Minister or I adjudicating on particular cases, and I want to stress that. People can say that this is or is not the case, but it is clear that we cannot adjudicate on the matter. The point I am making is that there is nothing to stop it happening. We have to rely purely on the submission of film producers who say “We would not possibly do that. Ours is a lovely industry. We are all a big family.” That is what one of the producers said: “We are a big family and we would never treat other people like that.” Yet, we had evidence in 2018 and we had it again at the Committee on Budgetary Scrutiny both from Equity and the film workers that it does happen. That is in terms of the film crew.

I will conclude my point on that aspect of my amendment, in which I am asking that the Minister would have a review of this film credit that ensures the film producers who get the credit cannot hide behind the DAC structure and that the Minister would issue a directive to make it absolutely clear that the recipient - the standing company - is legally responsible even after the DAC disappears. This would apply under the fixed-term work Act, which then leads on to all of the other requirements, because if people do not have recognition under that Act, all the rest of it becomes pretty much meaningless. This is in order to create that permanent pool of skills which, I repeat, is required under the EU directives.

My amendment refers to the need to address the issue of the actors and performers, another group of people working on film productions who allege that they are not being properly remunerated for the use of their intellectual property in terms of their performance on a given film production, and are being required to sign buy-out contracts in order to get a job, where their rights to future royalties and residuals on their portion of the performance, which is their intellectual property, are essentially waived, or they agree to a completely inequitable remuneration for their performance.

I repeat that film producers are being funded with public money. They have testified that without section 481 these film productions would not happen. We need to understand that point: film productions in Ireland would not happen without section 481. That is how dependent they are on public money. Those film producers are telling performers, dancers, actors and so on that they must accept a contract where their rights in terms of their intellectual property and many other things relating to pay and conditions generally are dramatically inferior to what their brothers and sisters who are performers and dancers in the North of Ireland, Britain or in most other jurisdictions in the world get.

I had a phone call with the president of Equity and what he said was really quite dramatic. He was particularly referring to dancers in a recent film production. He said the buyout payment given to performers in an Irish film production needs to be disentangled from their rights to residuals and royalties from their intellectual property. If the one-off payment that performers get for these things is taken out, when they then waive their future right to royalties, the actual wages being paid to these was less than the minimum wage. That is how bad it was. There are two components to how they are getting paid. They are paid wages and then they get a buyout payment for their residuals.

In one case a film was partly filmed here. There was a bit of an outcry about the conditions and the situation here. Some of the scenes for the same film were then reshot in the UK and the contracts were dramatically different. There were much better pay and much better rights to future royalties and so on. The president of Equity outlined a really important part of the difference. A performer may be required for one day's shooting, not required for two days and then back for another couple of days. Here that person is put on the dole for the two intervening days. They are signing on for social welfare, requiring more public money whereas in the UK, those performers are paid those days. Even if they are not being used, they are paid enough to ensure they do not have to sign on the dole. This is how inferior the contracts are here.

It then gets really bad. As well as the performers losing out from all this, there were certain questions raised from the Equity submission which we asked. The president of Equity wrote me an email afterwards stating that the questions had not been fully answered. It is complicated but I really hope people will start to get their heads around this stuff. It has taken me quite a few years to get my head around it. The Equity submission referred to potential abuse of the tax credit through a range of purchases practices, including internal pricing and artificially depressed income strategies. I would like the Minister to think about that phrase. It does not sound good, does it? It continues to refer to the flaunting of national and international copyright legislation creating an absurd situation where one arm of Government is supporting organisations in breach of the State's own legislation.

I want to read an email that came in response to some of the questions the president felt we had not answered. It stated:

I have realised, having watched the recording of our conversation, that we did not answer, clearly, some vital questions. Specifically the questions around internal pricing and income depression, and how the Designated Activity Company structure operates. These questions were asked at least three times in the course of the meeting. I would like to take this opportunity to answer those questions clearly here, as they are at the heart of the risks associated with the design of Section 481.

An Irish Production Company has a film project. They make an application under Section 481. The film project is deemed to meet the criteria and Section 481 Film Tax Credit is approved.

The Production Company then registers a Designated Activity Company for the sole purpose of producing this film.

The DAC is primarily an accounting tool, as all monies in and out of the DAC will be in connection with the production of the film.

The DAC can apply for and draw down 90% of the value of the 481 tax credit before the film is actually made or sold. Essentially this is an advance on the corporate tax that would be due if the Designated Activity Company makes a profit.

Within 18 months of completion of the production of the film the DAC is wound up. At this point the actual physical film (which exists probably on a hard drive) and all underlying copyrights are moved elsewhere for the purposes of Sales and Distribution. In other words the Designated Activity Company is incapable of making a profit, as it exists only to make the film, not to distribute or sell the film.

That is where the money comes from because it is from distributing and selling the film that the production company makes some money. However, that is moved elsewhere. I hope the Minister is getting this. Now we are not only talking about the performers, but we are also talking about a public investment where we cannot get a return on that investment and the company is designed so that it does not make a profit. It is not in its interest to make a profit and certainly for there never to be a return to the State. The email continues:

Within this kind of structure, and from a tax planning perspective, it makes sense to ensure that the film and the DAC make a loss. If it makes a profit then the tax credit which was advanced as a cash payment in the course of production would have to be repaid. The DAC structure makes it possible for the tax credit (which is paid out in cash) never to be reclaimed by revenue.

The final accounts for the DAC will clearly demonstrate that the company has broken even or made a loss. The finished film (the hard drive) and the bundle of underlying rights [belonging to among others the performers] will have been moved/sold into the Production Company or further on to a third company or a distribution/streaming company.

That company will get all the revenues and meanwhile we have advanced all this money and the company is designed to make a loss. I could read on, but it is a long piece. I will probably send it on to the Minister. Does he see a problem here? I really hope he does. This means that both the taxpayer and the artists and performers are losing out. Public money pays for the production for these performances and so on, and then all the rights, royalties and residuals accruing to that are moved elsewhere so that the production company gets them. The production company has a vested interest in ensuring that transfer of those rights is for a knockdown price. If the production company were to get a large amount of money, it would make a profit and money would have to go back to Revenue. It would need to pay some tax on the profit, but it is never going to do that.

Of course, the film crew would say that sort of price depression or whatever was also happening even at the most basic level on the film production. When they make a film, they buy all the wood and other material for the sets. They buy machinery and apparently they do not pay VAT on any of this which is also quite interesting and needs to be investigated.

Where does all that stuff go at the end of the film? It belongs to the DAC, which, as we know, is going to disappear shortly. Where does it all go? Is it sold? We had testimony that it is, in effect, given away. The public pays for it with taxpayers' money but it is, in effect, given away to the group of people who are running the DAC. Not only that, when the same group of people are working on a new DAC, they will come back with all the stuff they got from the last film production and will charge the next DAC for the use of the stuff paid for by the public on DAC No. 1. One could not make it up.

Something must be done about this in order that our artists and performers get the sorts of conditions and rights to benefit from their intellectual property at least at the level of what people get in the UK, France and so on. We must ensure employers have to vindicate the rights of workers and cannot escape and hide behind the DAC structure and, therefore, that those workers accrue some rights as people who have worked in the industry over time and cannot be thrown out of it at the whim of a film producer or head of a department who does not like them or because they kicked up and said the hours are too much, the trainees are being treated badly or whatever. If we did that, we would have a better film industry, we would make better films and we would get more, not less, investment. It would be good all around.

I am sorry for going on so long but the Minister knows how seriously I take this matter. There are a lot of issues unresolved and if there is any doubt as to whether this was just coming from a few disgruntled people, which is what some of the defenders of the status quohave tried to imply, we now know it is coming from more people than that. We are getting the same critique coming now from Equity. None of the substantial questions that were asked has ever been answered in terms of how people can be protected against this sort of thing. I will leave it at that. I really would like to see some movement on this issue.