Oireachtas Joint and Select Committees
Wednesday, 5 October 2022
Committee on Budgetary Oversight
Film Sector Tax Credits: Discussion
Neasa Hourigan (Dublin Central, Green Party)
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All those present in the committee room are asked to exercise personal responsibility to protect themselves and others from the risk of contracting Covid-19. Today we are looking at tax reliefs in the film sector. For clarity we will have two sessions today. First, we will have an hour and a half with representatives of the Irish Film Workers Association, IFWA, and then representatives of Irish Equity will appear at 7 p.m.. I welcome Mr. John Arkins and Ms Liz Murray from the IFWA.
Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. The evidence of witnesses who are physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. However, witnesses giving evidence remotely from a place outside the parliamentary precincts may not benefit from the same level of immunity from legal proceedings. They are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction from me.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him, her or it identifiable. I remind members of the constitutional requirement that members must be physically present within the confines of the place where Parliament has chosen to sit, namely, Leinster House, in order to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the parliamentary precincts will be asked to leave the meeting.
I remind members and witnesses that the remit of the committee is limited to tax expenditure and the film relief tax credit. The wider industry or sector is not necessarily within the committee's remit and any issues or cases specific to individuals or companies should not be discussed at this session. I invite Mr. John Arkins and Ms Liz Murray to make their opening statements.
Mr. John Arkins:
I am grateful for the opportunity to address the committee on section 481 of the Taxes Consolidation Act 1997, as amended. I have worked in the film industry for almost 29 years as a stagehand, supervising stagehand and standby stagehand since 1994. Since 1998 I have worked with the largest group of film producer companies in Ireland.
Central to my employment is section 481. Employment and training form one of only two key fundamental objectives of the Act. The current film regulations are covered by SI 119 of 2019. The objective of section 481, as amended, are set out in Part 2 of the regulations as follows:
(3) A certificate shall not be issued by the Minister under section 481(2)(a) of the Act of 1997 in relation to a film unless —(a) the film is eligible for certification under Part 3, and
(b) the Minister is satisfied that the film will either or both -(i) be of importance to the promotion, development and enhancement of the national culture including, where applicable, the Irish language (referred to as ‘the Culture test’), and
(ii) act as an effective stimulus to film making in the State through, among other things, the provision of quality employment, and training and skills development opportunities (referred to as ‘the Industry development test’).
The objectives as set out at subparagraph (i) are no longer met, as we understand it, despite the recent success of Irish language films. The objectives as set out in subparagraph (ii) are not capable of being met according to the employers and their representative body. It should be noted that film workers were fully aware that the objectives at this subparagraph of the regulations were not being met.
However, the fact that these objectives cannot be met only came to my attention by way of statements submitted to both the Workplace Relations Commission, WRC, and Labour Court of which I have direct knowledge.
The employer and the employer's representative body - Screen Producers Ireland - submitted to those statutory agencies that section 418 prevented the production sector from having an ongoing employment relationship with the crews. This they attributed to the structure of section 481 and the uncertainty associated with the production sector globally. They provided no rationale for this contention. If the facts submitted by the employers and their representative body are correct, then it begs the question as to why they and others consistently and aggressively lobby for the section's retention in its current form. Despite the forerunners of section 481 dating back to 1984, given the statements referred to above, the industry appears not to have benefited to any great extent from the legislation.
Until 2015, section 481 was a tax relief available to investors who had a corporation tax liability. It is now directly payable to film producer companies regardless of whether they have a corporation tax liability. Clearly, section 481 has become a handout, and a significant one, amounting to 32% of the budget up to a maximum of €70 million, plus a 5% regional uplift in many cases.
Given the employers' assertions and the fact that there are no companies of scale, no employees and no owned infrastructure despite almost €4 billion of taxpayer investment to date, it is clear that there are fundamental structural reforms relating to the relief that need to be debated and implemented. Film producer companies are the only beneficiaries of section 481, yet they are never directly heard. A number of outlier organisations run interference for them, which serves to muddy the waters and stifle debate. Given the requirement of the legislation that the relief be predicated on meeting the culture test and the industry development test, the only relevant voices are those of the producer company executives and the taxpayer. If those tests are not being met or are, for some inexplicable reason, incapable of being met by the beneficiaries, then the Minister is not doing her job and there are fundamental governance issues to be addressed.
One way to address the issues is by amending the order in which the relief is paid. Currently, 90% of section 481 is payable up front on certification of the film by the Minister. A fairer system for the taxpayer, and one that would afford significant protections for the workers, would see only 10% being paid up front. It should be noted that section 481 was not designed to be an operating subsidy or an investment buy-in for the producers. The remaining 90% would then be payable after six months when compliance had been determined by the relevant Departments. Compliance cannot be determined in advance. Although I am no expert, it would appear that corporation tax is a cumulative liability that cannot be determined in advance either.
What we are suggesting is not in any way an unreasonable request. Therefore, we urge Deputies of all parties to take the opportunity presented by the extension of section 481 and the impending amending film regulations to ensure that a fairer and more transparent system of stimulating film production is brought about.
Ms Liz Murray:
I am an advocate for the Irish Film Workers Association and I work in employment law. Section 481 of the Taxes Consolidation Act 1997, as amended and currently structured, does not work. It does not work for our cultural aspirations, the crews or the taxpayer. Committee members will have received submissions from a wide range of vested interest individuals and organisations, none of whom is a recipient of section 481. Many of the submissions will say that section 481 is crucial to the ongoing development of the film industry. While section 481 has been crucial to the development of the Irish film industry since 1984, there has been no significant development. If one cares to drill down, one will see that there is no indigenous industry because we lack the essential characteristics of an industry. We do not have large employment numbers - 2,158 was the Department of Finance's estimated figure in 2019 - and the producers do not appear to have a business model, buildings, infrastructure, machines, vehicles, etc. Since the producers do not own content, they have no ownership of the product either.
Content is crucial to the taxpayer as well. Creative Capital, a Department-commissioned report to plan for the industry from 2011 through 2015, recognised the issues relating to owning content in the films being made. One of its key recommendations highlighted the difficulties for the indigenous industry when the producer companies concentrated on simply servicing "Hollywood" productions. The report's committee recognised ownership of content as crucial to development. This is what it said was needed: "Rights ownership to vest in production companies and content creators to drive export growth."
I will outline a few facts about section 481 that are not generally understood or may be ignored because they do not fit the narrative of the vested interests. The objective of section 481 and its predecessors was to stimulate the development of an indigenous Irish film industry, meeting two key criteria - a culture test and an industry development test. My colleague, Mr. Arkins, has referred the committee to the relevant film regulations. Section 481 is payable to an Irish producer company that has a track record in film production, is based in the State and gives a solemn undertaking to the Minister that it will adhere to all employment, social and Community laws. Section 481 is not payable to foreign directive investment, FDI, companies and is not intended as a mechanism to attract FDI, according to the legislation. If filming here, FDI companies must take on an Irish producer company and crew.
Section 481 is part of a significant suite of State aid available to Irish producer companies to meet the criteria of the regulations. Be that money loans or grants from Screen Ireland or investment by RTÉ, TG4, the Broadcasting Authority of Ireland, BAI, or any other State-funded agency, the criteria are the same. The sole objective of section 481 is to develop an indigenous industry turning out Irish product. It is not payable so that the producers can invest it in "Hollywood" for no return on the investment to anyone other than themselves. Section 481 is not payable so that the producer can service American multinational and streaming platforms so that, when they complete their film or TV projects, fold up their tents and strike for home shores, the Irish producer lays off the crews and sits back until another service opportunity arrives. This is not the way to develop an indigenous industry, yet that is the reality in Ireland.
State aid to film productions is mandated by EU law. The obligations are the same - produce films that express European culture and train and maintain a permanent pool of experienced employees. It is unclear how the EU will view Ireland's film industry if we are only servicing Hollywood productions and not developing an indigenous industry or maintaining a permanent pool of experienced crew.
Using the Government's own commissioned report as a benchmark, there are approximately 500 production companies in Ireland. Based on Department of Finance figures, there are 2,158 employees, 900 of whom are PAYE workers, the remainder being freelance grades. This translates to an average of 2.5 employees in each of those companies or, in other words, the principals of the companies. This is wholly consistent with what our association has known for many years through union membership figures. It is a far cry from the 17,000 being touted by vested interest groups. Crucially, the 2,158 have as-and-when jobs, not full-time ones.
To recap, there are no jobs other than casual as-an-when jobs, no buildings, no infrastructure, no camera equipment, post-production or other paraphernalia associated with a production process, and we do not own any content of note. In other words, there is no industry. Is that a fair return for the taxpayer on an investment of close to €4 billion since the reliefs were introduced? Not by a long shot.
We hope the committee can see there is something fundamentally wrong with this picture and urge reforms, and that the key stakeholders, that is, the taxpayer, the employers and the employees, can be brought to the table to debate what are serious and fundamental structural problems. With amending film regulations imminent to reflect the extension of section 481, the time for debate is now. Kicking cans down long roads does not work and will not work anymore. The taxpayer simply cannot afford this playacting.
Pearse Doherty (Donegal, Sinn Fein)
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I welcome our guests. They have made a clear and compelling case for how this is working, or more accurately not working, in its aims and objectives. They mentioned, in the context of qualifying for the relief, that production companies are required to pass certain tests, one of them being the industry development test, and that they need to provide quality employment and submit reports, including evidence they have followed the WRC findings or an explanation of why they have not done so. Are production companies passing the industry development test, and if not, how are they able to avail of section 481?
Ms Liz Murray:
We can only give anecdotal evidence. Currently, 40 people have been displaced from their employment. No reasons were given, although we suspect it has something to do with us looking for rights of entitlement under employment legislation. Members of the association, my colleague included, appeared before an Oireachtas joint committee on culture in 2018 and six months after that, he was displaced, as were the other workers who made the case.
The employers have not turned up at the Labour Court to discharge their burden of proof. They have made submissions to the Labour Court and the WRC to say they do not employ anybody. Their representative body made a submission to the Labour Court stating that the structure of section 481 prohibits an employment relationship between the parties. I cannot see how that is the case, because how else can the industry development test be met?
As for production companies, nobody has a crew until somebody starts a film. There are no crews in any of the production companies in Ireland until somebody makes a film. They then go into the marketplace and hire a crew through, say, props heads of department and construction heads of department. Our people are on the construction end in set craft. A construction manager is hired and he or she rings the crew members and asks whether they are available and can come in. That is how it goes. The production companies pay the crew and when the film is finished, they are laid off. If the crew members are lucky enough to be able to claim from the Department of Social Protection, that is what they do until somebody else looks for them, notwithstanding the fact they have might worked extensively with one employer. Mr. Arkins, for example, spent 20 years with one employer.
Mr. John Arkins:
I might come in on that and on the idea of the employment test being met. I am a living testimony of the employment test. I have worked here for 28 years. The way it works in the film industry is that when you finish a production, the clock goes back to zero and you have no rights. You have no benefit from your service. I am a man of 58 years of age. I lost my job because I appeared here in Leinster House in 2018 to talk about what it is like to work in the film industry, as did 40 other men. I cannot get a job because I have no references from my 28 years of work. The people I have worked for refuse to give me a reference because they say I do not work for them. That is the impact on me, as a 58-year-old man in Ireland today, after working in a film industry where my employer has €4 billion to create quality employment. I have to hand copies of agreements that have governed my working life going back to 1994. I was promised a pension in 1994 but not one penny has been put into a pension scheme for any worker in the film industry.
I am one of the men involved in the WRC case. I was told to go to the WRC by Deputies in this building and I went and put in my case. The people I identified as my employers have said they are not my employer. They do not turn up. One employer has made €250 million within six years but he did not turn up. Even when he was subpoenaed by the Labour Court, he did not turn up. I have copies of statements from the representative body that produced a collective agreement stating that none of its members can have an employment relationship with any crew member, trainee or employee.
If there cannot be a relationship between an employer and an employee, there cannot be an industry. They are the two blocks an industry is built on. If I am making something and producing work, I will need a crew along that production line to make it. I will need to sell it, get something back from it, put that back into my business and industry and keep on building. That is how a business starts. I could bring before the committee a gentleman who worked in the industry for 44 years. The €4 billion has to be spent in his lifetime. He was told to get off the site and that he was not wanted, after 44 years. He too is a living testimony. We can prove the employment test is not working.
Pearse Doherty (Donegal, Sinn Fein)
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Mr. Arkins's testimony is very powerful. The way he has been treated is simply not acceptable. Nobody should be punished or blacklisted or lose his or her employment for advocating for better working rights for themselves and their fellow workers, and I hope this hearing can get to the nub of some of this. Given the testimony we have heard, it is clear, as he said, that a signed statement that screen producers submitted to the Labour Court claimed that their members cannot have an employment relationship with workers because of the operation of section 481, and as we know, employees are employed through DACs. It appears, however, that that is in conflict with section 481, given that section requires the applicant to give an undertaking to provide quality employment and to comply with all the relevant employment legislation. How can a company, therefore, benefit from section 481 and the tax reliefs that flow from it and give that undertaking if it does not employ anybody? Has Mr. Arkins or any of our other guests had any interaction with the Department of Finance regarding how companies are qualifying under these rules given they are not employing employees directly, are leaving that to DACs and are then operating at an arm's length from it?
Ms Liz Murray:
The section 481 relief is paid to a producer company, not to a DAC. A document concerning section 481 was produced by the Department of Finance in the context of budget 2023.
This document says this is paid to the producer company and the special purpose vehicle is for accounting purposes. It is an accounting tool to keep the money for each film within the confines of that single film so it cannot be spread about to other films. In the context of section 481, therefore, the DAC is muddying the waters in that the employers are telling us or trying to imply the DAC is perhaps the employer. However, in the undertaking the Department of Finance made in 2019, the Department specifically mentioned certain legislation. The Protection of Employees (Fixed-Term Work) Act and adherence to that is mentioned specifically. A person must be employed on two contracts over a four-year period to qualify for that. The producer company then has to be the one with the responsibility to ensure adherence to that particular legislation, and from that flows all other legislation, but because that has a qualifying criteria of two contracts over four years, it is the one that is easiest to relate to. It is simple to do that.
On the Deputy's question about the Department of Finance, the lads are calling me Andy Dufresne from "The Shawshank Redemption" because I write so often. I have written to the Department of Finance and the Minister in particular, I have written to the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media and the Minister there, as well as her predecessor. We have been writing to the Department of Finance since 2010. We asked for forensic accountants to come in and examine the relationships and everything else because we cannot get to the bottom of it. This document that was produced is so confusing. There is something here that the Department says there are 8,630 weeks in relation to a production in 2019. It is a long time since I was in school but as far as I know there are 52 weeks in every year and it does not matter how you spin that, you cannot come to 8,600 or whatever weeks in a one-year period. We have written to the Department of Enterprise, Trade and Employment. Our case-----
Neasa Hourigan (Dublin Central, Green Party)
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I do not mean to cut across Ms Murray and she is answering the Deputy but we have a time limit for every set of questions and answers and so I must move on. Ms Murray may wish to finish off that point.
Pearse Doherty (Donegal, Sinn Fein)
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I thank Ms Murray.
Neasa Hourigan (Dublin Central, Green Party)
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Deputy Boyd Barrett is next. I remind everybody it is section 481 we are talking about today and not the WRC.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank Ms Murray and Mr. Arkins. In fairness, they have not gone into the individual adjudications, if you like. What they are saying is incredibly relevant because it underlines the point that the sole purpose of this tax relief is to create quality employment and training and to contribute to Irish culture. If it does not do those things, then it should not be paid out. More to the point, the recipients of that must sign a solemn declaration saying they are doing that. Ms Murray and Mr. Arkins have spelled this out, but if they feel there is anything more they can say to do so, then they should, because as I look on, there is an incredible, gross contradiction. On the one hand, film producers last year could get €100 million for this by signing a solemn undertaking they are creating quality employment and training, and then the very same people can walk into the WRC and say they can have no employment relationship with the people who worked on the film production. It is not just that they do not have an employment relationship with Mr. Arkins or a particular individual but that they say they cannot have an employment relationship with them. They are blaming section 481, which is dubious, to put it mildly, but it is an incredible contradiction. I do not know if Ms Murray and Mr. Arkins want to spell that out. In that regard, I ask them to elaborate the point about the EU directives on state aid and industry development, because from my reading of this, the only reason the EU allows particular forms of state aid is to create a permanent pool of talent. How do you create a permanent pool if the people who get the state aid say they cannot under any circumstances have any employees? It is hard for me to understand how that can be sustained and whether it has to be investigated. Ms Murray and Mr. Arkins may have some comments on that.
Another question I am interested in relates to something our guests often say. Maybe it is worth underlining the figures for how much has gone into section 481 over the past decade. Our guests always put it fairly starkly by asking what we have got for all that public money. Can anybody think of any other area of expenditure where the State would have forked out €4 billion and have nothing, literally nothing, for it, namely, no employees, no ownership of content, no studios, no equipment and no props? We have literally nothing. Maybe they could say a little about where that money is going or where they think it is going because, at the end of it, the State does not seem to have anything for the investment. Where is the physical equipment bought with section 481 money on film productions going?
Mr. John Arkins:
I can answer that because I worked there for 25 years. I was one of the people who went and collected all this equipment. First, the equipment is bought by a production company using a VAT exemption form, so it does not pay any VAT on the goods it is buying. That could be scaffolding, timber, paint, bathroom suites or anything. A tax exemption form is handed in and no tax is paid on it. The production gets all the stuff it needs. I have worked on productions from the likes of "Love/Hate" to "King Arthur". On all these jobs there are props and stuff built. When all this stuff is built, it is accumulated. At the end of the job there is what we call a fire sale. The people who end up buying this stuff are usually the heads of-----
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Just to be clear, that stuff is bought with-----
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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With taxpayer's money, yes.
Mr. John Arkins:
Usually at the end of the production, in my years of working there, all the stuff bought for the construction end of things, that is, the machinery, tools, plant, scaffold and fittings, would be sold to the construction manager of the production. He would store it in his warehouse. It would not be hired to anyone else, it would not go anywhere else and there would be no other business plan. Then when the same producer would be doing a job, and I worked with the same construction managers and producers for 20 years, they would hire back at below the market rate the same stuff the taxpayer paid for on the previous production. That puts pressure on the hire companies outside that hire stuff out. That is where the stuff would go and that is the same for all departments. I know that because I have witnessed it. I have been in the warehouses where the stuff is that was bought by the taxpayer for the productions and for the production company that is supposed to be building a company of scale. It is getting money to build a company of scale, to hold on to this and to these employees to save taxpayers money in the long run. Instead, they rent the same equipment the taxpayer bought 20 years ago for 20 years. That one scaffolding tube could cost the taxpayer €1 million over a 20-year lifetime.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We are paying for the same stuff over and over again.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Maybe Ms Murray will say a little about the EU directive conditions on state aid for the film and audiovisual industry.
Ms Liz Murray:
Yes. It comes by way of communication. I am sorry but I cannot remember the number. It is communication 13 or No. 381 of 13.
The section 481 legislation mirrors it to a certain extent. I know the words are different but it mirrors it to a certain extent. It seeks to develop a European film industry. Europe cannot compete with America. This is crucial because many of the productions coming in here are American productions and are made for Disney, Netflix, Amazon Prime or some of the other streaming channels. Again, it mirrors section 481 so it seeks to develop a European industry capable of competing with Europe because we recognise we cannot compete with the Americans, to develop a permanent pool of employees and to be of cultural importance to European culture.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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One of the other things about which I am curious because I have read the Equity submission - I think this committee needs to seriously investigate this - is that the producers who receive section 481 assistance on the explicit requirement of creating employment and training, but then say they are not and could never be an employer when asked by employees for their rights, also seem to have ownership of the content about which we are talking. At the very least, there is a question mark over where the ownership of the content goes. In its submission, Equity says that in respect of the intellectual property and the royalties that would flow from their share of that intellectual property, they are either asked to sign away their entitlement or to get a far lower proportion of it than in other jurisdictions. Is it the case that the producer is saying on one hand that it cannot have employees but on the other that it owns the intellectual property?
Ms Liz Murray:
It is muddier than the darkest Hollywood drama. It is so muddy that it is very difficult to understand. One of the largest production companies has told us that it owned content in a particular project and, therefore, could make an arrangement with the crew. Arrangements were made in terms of employment and a profit and the producer said he could do that because he owned some of the content, as I understand it. I do not know who owns any other content. I imagine the Americans do not let it go cheaply when they come here. I do not imagine so. I do not know the answer to that but I know what Equity is talking about - because the crews do as well - is the fact that they have to sign over their intellectual property rights to the producer. A producer is actually entitled to intellectual property rights in a production. A producer owns that. For performers, there is equitable remuneration for their rights. They sign a contract as with the DAC company. After that DAC is wound up, they are supposed to be told where their intellectual property rights go - who then has ownership of those intellectual property rights - but they are not told that. They do not know what happens.
Mr. John Arkins:
The Ladybird version, as the crew understand it, is that the production company, which gets the money, owns a 100% share of the DAC so it can say it goes to the DAC but the producer owns a 100% share of that DAC. It is all deflection away from the producer but the fact remains that the producer owns a 100% share of the DAC that is set up with section 481 money so the producer has the property rights. We do not know what the producer does with them but the DAC is just an accountancy tool. It has nothing to do with any of this stuff. You have to go and ask for the person who gets the section 481 money and that is the problem. Nobody actually asks them any questions. So many people are running interference. You need to ask them the questions because it is not me who is saying that they cannot have any employment relationships. They are saying it. They are saying it in submissions they lodged in the WRC. We have the documents and we can show them to anyone.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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So in a word, would Mr. Arkins advise that we need to talk to the producers?
Mr. John Arkins:
The Government has given €4 billion of taxpayers' money and has never spoken to the person to whom it was given. In my 28 years working in the industry, not one person who got one red cent of that money has been asked what he or she did with it. Even when it comes to their accounts, you cannot find out where the money is. They use a TR2. Nobody can find out where the €4 billion has gone. I do not understand. Politicians are put in a privileged position by the Irish people - Irish taxpayers - to pay out their money but they have not spoken to the people to whom they gave it. I spoke to a person about section 481 and this is what he said to me in the WRC.
Mairead Farrell (Galway West, Sinn Fein)
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What the witnesses have said so far has been really enlightening but it has also shown the passion and how much it has impacted on all the witnesses' lives. I take Mr. Arkins's point about how at the end of the day, none of these questions have been asked before while billions have been spent on this. I accept fully his point that it is for us to investigate this. To be fair, Deputy Boyd Barrett has been talking about this for a long time so I thank him. As Mr. Arkins said, it costs the State €4 billion. Who is the biggest beneficiary and who bears the biggest cost? In his opening statement, Mr. Arkins pointed out that the real value of the film and TV industry is not at the point of production but is in the copyright and intellectual property created by all the parties. According to the Department of Enterprise, Trade and Employment, enforcement of intellectual property protection is essential to preserve the legal validity of intellectual property rights, prevent infringement in order to avoid wholesale damage to a person and his or her goods and services, including loss of goodwill and reputation, and seek compensation for actual damage caused. Does Mr. Arkins think the State is failing in its obligation to protect the intellectual property of all parties involved in bringing a film or TV show to the screen?
Mr. John Arkins:
The whole thing about intellectual property is best left to Equity. I am a supervising stage hand. Some €4 billion has been spent so far. If we made content and if there are intellectual property rights, money should be coming back somewhere. If money is coming back somewhere, why do they still need handouts?
When do we find out who owns the copyrights and content? We know the producer, who is the 100% shareholder of the DAC, got the money. The questions need to be put to him.
As far as intellectual property rights are concerned, my colleagues and the people I have worked with in front of the camera will speak to that. I do not know much about that issue but I do know, as someone who has worked in the industry for almost my entire adult life, that X amount of money has been spent and if we were making a success of the industry, there would be money flowing back into the country with all of the content that we have turned out. Who is getting the money from the content?
Mairead Farrell (Galway West, Sinn Fein)
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Mr. Arkins has made a fair comment. I am interested in bogus self-employment and we have heard that it appears to be rife in the industry. Have the witnesses heard about moves to change the situation? Has scope done anything on that issue?
Ms Liz Murray:
Three of our members took a case to scope because they had been employees for a number of years and were then encouraged to become self-employed because in 2009, the film industry entered into an agreement with the Revenue Commissioners that permitted certain grades with qualifying conditions to be self-employed. Regarding the three people, of whom I am aware, scope found against the employer in those cases but those three people were not listed. The contracts that were issued to them called them something else other than the grade in which they were actually employed. This was done to suit the document. In 2019, the document was withdrawn but a new version is under negotiation. I have seen the draft of the new version and the people negotiating it are a commercial semi-State company, Screen Ireland. I do not know what its involvement is but it has a huge involvement in employment matters that should not have anything to do with it. The new document is being negotiated and they are looking to include actors as employees. The irony is that we, the crew who have worked for all of these years, are not employees when it comes to prosecuting legal rights of entitlement. Actors are truly freelance because they have unique qualities and Screen Ireland now wants them to be employees. My suspicion is that someone who is an employee of a company does not have any intellectual property rights. That question needs to be asked as well.
Mairead Farrell (Galway West, Sinn Fein)
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Regarding the concern about the level of concentration among big players and the lack of competition, how is Screen Ireland performing in promoting competition and supporting up-and-coming players?
Ms Liz Murray:
It is not supporting them very well at all. I am sure the Deputy has heard about the recent very successful Irish language film which won an Irish Film and Television Academy, IFTA, award. It is reputed that it might be nominated for the foreign language category at the 2023 Oscars. Screen Ireland gave a loan of €350,000 for the film to be made. The biggest employer in the State, who has had 19 DACs and has been in business since 1998, and his partner, who has been in business since 1984, are associated and subsidiary companies. One of those partners drew down €700,000 in a loan to make a film. This man has been the recipient of a section 481 tax credit and since that was paid to the producers in 2015, this company and its two directors, whom I have described, have drawn down between €89 million and €264 million under section 481.
Neasa Hourigan (Dublin Central, Green Party)
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I remind Ms Murray not to go into the sphere of individual companies.
Mairead Farrell (Galway West, Sinn Fein)
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I thank the witnesses. I will let others contribute now. The reason I kept my video off was to avoid being on a big screen looking down at the proceedings but I have been listening.
Patricia Ryan (Kildare South, Sinn Fein)
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I attend meetings of this committee every week and this is the most bizarre meeting I have attended. Having advocated for workers' rights as a shop steward, I am baffled by the no employees piece.
Mr. Arkins spoke about the constraints of section 481 and suggested the way to address these issues is to amend the order. I would like to hear his opinion about an issue as I believe he is best placed to give an opinion. I agree with Deputy Doherty that the way people have been treated is completely unacceptable. What is the best way to deal with this issue?
Mr. John Arkins:
As I said, the best way to deal with compliance is not to give 90% of the section 481 tax credit upfront. Only 10% should be given and the company should be required to have in place all of the funding to make the production from elsewhere. After three months, the Departments responsible for culture, finance and jobs should check the position and only give the remaining 90% when all of the boxes have been ticked. That would safeguard taxpayers and workers and would build an industry. That is the only and simplest way to do this.
We have outlined other ways to operate the section 481 tax credit. We came up with the idea of using what was done in the Foynes pay office where various stevedore companies were coming in and people did not know if, when or where they were working. We suggested that the money should be given straight to a company, which would look after employment, pensions, training, jobs and everything else. This would ensure there was a structure in place but our suggestion was not taken on board.
We also suggested that everyone be paid for a flat 40-hour week and the stamps would continue to be paid when the production comes to an end. Nobody would be in breach of legislation and so forth. We have made 101 suggestions but the problem is that the person who got the money is not being asked the question. We are talking about the Irish Government here. It takes one official with a phone on his desk to make five phone calls because there are only five or six employers in the country.
Patricia Ryan (Kildare South, Sinn Fein)
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I take those comments on board. As Deputy Boyd Barrett said, we need to ask that question about the €4 billion.
I understand that State support for the arts and culture sector remains below the EU average. Besides section 481, what else can the Government do to improve that support?
Ms Liz Murray:
It is very difficult to answer that question. I am not sure. State aid rules mandate the Irish Government and all member state governments to produce a document listing all of the recipients of state aid, the amount they got, when they got it and every source from which they got it. We do not know that.
RTÉ has a production budget. It sets aside €40 million a year out of the licence fee to commission independent content. The BAI gives a whole load of money. The current capital spend for the film board is €20 million. TG4 has an obligation. There are so many obligations it is very difficult to see where the funding goes and why. If the Government were to say that I as a film producer received X amount under section 481 for, for example, "A Nice Boy", it might say that I got it from RTÉ because that is where it will be shown. I might have got some from the BBC. We are speaking about a lot of State money. State broadcasters in Luxembourg and other countries feed into this. Canadian money is put in. If we could find out where all the funding goes and why it goes there we would be able to establish how best to address the arts. The entire arts sector is decimated, including musicians. It is not just the film production sector. Artists pay their taxes and we get something back because they satisfy audiences. We get nothing back from the film production sector as far as I can see.
Mr. John Arkins:
To come back to the question that was asked about ideas on how to make it better, we have suggested giving the subsidies directly to the production companies based on the number of employees they have, their infrastructure and their costs. That way when the State wants to find out where the money has gone it could speak directly to them. They are who the State should be talking to. Section 481 funding is given specifically to people who have employees. It is given to the producer as the employer. No one else receives section 481 funding. I, as a stagehand, cannot understand why the people with the €4 billion are not being asked how many employees they have and what is their infrastructure. One third of section 481 funding is for training, jobs and infrastructure. Asking what has been done with it is a very simple question.
Ruairi Ó Murchú (Louth, Sinn Fein)
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Ms Murray and Mr. Arkins have said there are approximately five or six of these producers. Let us imagine I am one of them and I apply for section 481 funding. We all get the idea that there is the culture test and the industry development test. There is meant to be quality employment and other factors. What do I get as a percentage and on what basis do I get it? I imagine I am meant to ensure I have other aspects of the funding sorted to deliver the project.
Ms Liz Murray:
I cannot answer that question. There are criteria. There is a great big document that producers have to fill out with various sections and an undertaking at the end that they will adhere to all of the legislation. It is on this basis that the Minister certifies the film. It then goes to the Revenue Commissioners to be paid.
Ruairi Ó Murchú (Louth, Sinn Fein)
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Is it paid up front?
Ms Liz Murray:
A total of 90% is paid up front. We do not quite know how it works. A production or development loan of up to €1 million can be obtained from the film board. This has to be paid back on the first day of shooting of the film as I understand it. I believe compliance is determined when the film DVD is delivered to the Revenue Commissioners with all of the accounts. I am not sure how the Revenue Commissioners can ensure it is all perfectly okay. This raises a major issue. The phrase "stand down" is used in the industry. If I lose my job after 20 years I am stood down. Many of my members were stood down in August and November 2018. That particular employer did not make another production until December 2019. These people had been stood down for one year and four months by that time. The employer did not re-employ them. He blacklisted them. I went to the Workplace Relations Commission which told me we were statute barred because these people should have taken a case on the day they knew it had happened. People did not know it had happened because there was no termination letter. Really and truly, we should be able to determine compliance after the six month time period for prosecuting a case runs out.
Ruairi Ó Murchú (Louth, Sinn Fein)
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That makes-----
Ruairi Ó Murchú (Louth, Sinn Fein)
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What Ms Murray is saying is that there is an element of due diligence that is not being done.
Mr. John Arkins:
I do not know whether this is relevant but I have an example of section 481 funding that I want to share. Approximately 40 films have been made over the past 50 years reflecting some of the culture of Ireland, nine or ten of which were in the Irish language. The total value of section 481 relief for the production companies making Irish language productions in the period from 2015 to 2022 was €120,000. One of the companies, which I shall refer to as "Company B", serviced productions for multinational streaming platforms in addition to one-off film projects. It drew down section 481 funding in the category of between €89 million and €264 million. We know it is at the higher end of this category because we checked it ourselves.
Neasa Hourigan (Dublin Central, Green Party)
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I remind Mr. Arkins not to make any company identifiable.
Mr. John Arkins:
I will not do so. I will refer to it as "Company B" and I will not mention the name. Company B owns content in at least one streaming production. It has also availed of supports available from Screen Ireland. In 2021, Company B received a gift of €650,000 from Screen Ireland to enable it to become a company of scale. This company has also made submissions to the WRC, as we have mentioned already. This is how section 481 funding is being used and what it is being used for. If I can source this information from public websites so can anyone else. We can provide this information on companies' submissions and what they state they are doing and not doing. It is not us who are saying this. This is what the companies are saying.
Ruairi Ó Murchú (Louth, Sinn Fein)
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If I am producer I get section 481 funding and I put the money into a designated activity company, DAC. This DAC will last for the time it takes to make the production. Within this are whatever costs are incurred. We are not quite sure about the end product of this. Whatever about what must be given to the Revenue Commissioners for ticking the boxes, we do not know who owns what intellectual property because the DAC no longer exists. The tool that was used to draw down the money disappears and we have an entity that may or may not be worth a huge amount of money still in play. The witnesses have spoken about materials that are bought that do not stay in play. I imagine the entire idea of section 481 was to build up industry.
Ruairi Ó Murchú (Louth, Sinn Fein)
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Beyond that is the question of how the section impacts on film workers. We have referred to the industry development test and, within that, quality employment, but the film workers are all self-employed. A department head either rings people up or does not, whichever the case may be. This is almost a pre-1913 operation.
Ruairi Ó Murchú (Louth, Sinn Fein)
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A number of the witnesses have been involved in advocating for their rights, so they do not get the calls.
Ruairi Ó Murchú (Louth, Sinn Fein)
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Am I right in believing that is happening to a greater degree now?
Ruairi Ó Murchú (Louth, Sinn Fein)
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I wish to ask about working conditions on current productions. I imagine there is a significant number of experienced staff-----
Ruairi Ó Murchú (Louth, Sinn Fein)
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No, I was going to say there are experienced staff who are not getting the calls. Who is getting the calls?
Ruairi Ó Murchú (Louth, Sinn Fein)
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Are these trainees?
Mr. John Arkins:
Yes. The companies need to get rid of all the people who are entitled to contracts and duration under the legislation. They are getting rid of them at a pace of knots. They are bringing in new people and saying they have 1,100 trainees and are doing this, that and the other, but you will never meet a trainee. If you ask a trainee who he or she works for, the trainee will not be able to answer.
Ms Liz Murray:
That is an awful thing at the end of a working relationship. I was struck by something in the document produced by the Department of Finance on budget 2023. The Minister stated that a new collective agreement had been agreed with the Irish Congress of Trade Unions, ICTU, regarding construction crew. Part of that collective agreement deals with pensions, but there is a significant issue with pensions, one that also has to do with state aid and Europe in general. The agreement is an industry agreement that the Department says should make things equal, but it does not stand approved by the Labour Court. Industry collective agreements were shot down by the Supreme Court as being unconstitutional. The Deputy will recall the construction industry registered employment agreement, REA, and the catering agreement. For example, National Electrical Contractors Ireland had a case. Those bodies won their cases and the legislation was amended in 2012. Now, we can have sectoral employment orders, but they must be approved by the Labour Court. The Labour Court must take a great deal into consideration, for example, the amount and ratio of representation in an industry. If there are 2,158 people, it will not take much to work out the ratio, but we must also take into account the added dimension of other member states. If someone from another member state comes to Ireland, his or her terms and conditions of employment cannot be driven down because we have an agreement that is at the minimum rates of pay. I believe our colleagues in Equity will speak to the committee about the UK agreements and how Irish actors fare worse here than equivalent actors who come from outside.
I am sorry for forgetting my train of thought, but I wished to say something to the Deputy relating to Mr. Arkins's point. A construction industry pension has been set up for people who work on film productions. I presume, if someone says he or she wants money to be deducted, it will be. I inquired about that pension. Guess whose name it is in.
Ms Liz Murray:
Screen Producers Ireland. The trade unions asked the Construction Industry Federation, CIF, pension scheme to allow these people, who are not in the construction industry, to open a pension scheme for them, but they cannot identify their employers. Mr. Arkins referred to inexperienced workers. They will become experienced. At the end of their working lives, they will knock on the door of the CIF pension scheme and say they believe they have pensions there. They will be then asked who their employers were, but they will not have a clue because they will not be able to point to a DAC or a parent company. They will not know that it is the representative body.
Mr. John Arkins:
I have been in the WRC a few times. The Labour Court has told me the agreement between Screen Producers Ireland, SPI, and SIPTU covers only the people who work for SPI. It does not cover a single worker on productions. Not a single worker outside of SPI's office is covered by that collective agreement.
Ruairi Ó Murchú (Louth, Sinn Fein)
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The workers are on their own, there is no representation and they have been failed. Many of us would have believed Screen Ireland and so on would have had some element of representation from crews and others working in the industry.
Neasa Hourigan (Dublin Central, Green Party)
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I am sorry, but we are at the end of this section. Ms Murray might finish up that point.
Neasa Hourigan (Dublin Central, Green Party)
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I will try to finish this session at 6.55 p.m. to allow the next session to begin. I will open the floor for two minutes of questions apiece, so members might indicate if they wish to contribute again.
While members are thinking, I will ask some questions. I noticed from the opening statements a discussion on matters such as buildings, infrastructure, machines, vehicles, etc. As someone who does not know the industry well, I am trying to get a sense of how realistic long-term ownership would be. Is it an industry wherein the technology moves on quickly and there are specific projects that require specific technologies? Is it an industry that is more used to a leasing system? For example, many medical facilities use leasing systems because medical technology moves so quickly.
Ms Liz Murray:
Capital expenditure is not covered by section 481. As I understand the section, people cannot hold on to whatever is left over at the end of a film. Someone should examine this issue, though. How can we have an industry if the people who are working in it have to get taxpayers' money to rehire or repurchase equipment time and again?
Neasa Hourigan (Dublin Central, Green Party)
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That is what I am trying to get at. Is it a purchase industry or a lease industry?
Neasa Hourigan (Dublin Central, Green Party)
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There is a one-off purchase, but then it is a lease system.
Mr. John Arkins:
For the duration of a production. Technology is advancing, but that is usually at the camera end of things and in computer-generated images. In terms of building physical sets, though, the system has not changed since the start of the film industry.
This system has not changed since the film industry has been around. We build sets out of solid material, including timber, plaster, paint and metal. This is not going to change.
Neasa Hourigan (Dublin Central, Green Party)
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The parameters and the stages of-----
Neasa Hourigan (Dublin Central, Green Party)
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For my information, the UK was mentioned and in preparation for this meeting I read about some of the changes there. The industry in that country has brought in new agreements in recent years. Specifically in the EU, though, are there employment agreements that are making a better fist of this type of situation where a film industry interacts with tax expenditure measures such as section 481?
Neasa Hourigan (Dublin Central, Green Party)
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Okay.
Mr. John Arkins:
In France, it is recognised when film workers go onto social welfare payments that they will be called back to work. That is done by the stamps they pay in. A system like that operates there and this is the example we should be considering. We should not be looking at anyone else except our nearest EU neighbour.
Neasa Hourigan (Dublin Central, Green Party)
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This issue comes up across several sectors that would like the social welfare system to recognise that a skill might be seasonal or intermittent. Would any Deputies like to ask another question? I call Deputy Boyd Barrett.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Does Mr. Arkins think we are in serious breach of EU directives around state aid, etc? I think we are, and I would like a comment on this point. I refer as well to companies of scale and the other conditions in respect of what is happening in the context of section 481. I would also like Mr. Arkins to comment briefly on the studios here. I am curious about this point. Public money was involved in Troy Studios, was it not?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I also think I am correct in saying that public money was originally involved in Ardmore Studios.
Neasa Hourigan (Dublin Central, Green Party)
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We are not identifying any particular groups or projects. Is that okay?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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These are film studios. I think it is legitimate to mention film studios. I honestly do. Can we not mention film studios?
Neasa Hourigan (Dublin Central, Green Party)
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I would prefer if we made things more general. We have all agreed in the session, generally, not to make particular groups or projects identifiable.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We will just call them film studios, including the former national studio. To ensure I understand this aspect, I think public money went into all these studios and the ongoing operation of section 481 would have contributed to their maintenance. Is it correct to say those studios have no employees?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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There are no crew workers in those studios, however.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Perhaps I am innocent, but it seems very odd to me.
Neasa Hourigan (Dublin Central, Green Party)
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I do not think Deputy Boyd Barrett is innocent. I do not think anyone could accuse him of that. Deputy Ó Murchú wishes to come in, but Mr. Arkins can answer this question briefly if he wishes.
Mr. John Arkins:
I have worked in studios all over the country. They have a running crew of about five or six people. One of the studios I worked in, which was funded by the Government, used to have a canteen. There were staff in that canteen, but that is all gone now. Basically, only about five or six people work for the studios. That is all. They are basically just big empty buildings waiting to be hired out for productions to come into. They do not get section 481 money.
Ruairi Ó Murchú (Louth, Sinn Fein)
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Going back to section 481, people may or may not be aware of a production funded under this provision that seemed to go bust recently. Again, it probably adds to what was said about the lack of due diligence. I would have understood it as being necessary to have all the finance in place before the State would throw any money in. It is just-----
Ruairi Ó Murchú (Louth, Sinn Fein)
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By whatever means, the one thing we will all agree on is that there needs to be an element of due diligence, which would mean that we would see this process happening beforehand or that there would be protections in place to ensure we did not end up in this type of situation.
Turning to another point, when we talk about materials being bought with taxpayers' money and then being leased back, who actually owns these materials? Who is getting paid the second time?
Ruairi Ó Murchú (Louth, Sinn Fein)
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Right. That DAC then disappears.
Mr. John Arkins:
At the end of the production, and if I were the head of department, HOD, I would be given first dibs regarding what was needed on the next production. It might be the fork truck, the scaffolding, the tools and the machinery, for example. A warehouse would then be bought and everything would be put in it. It would be possible to get it for practically nothing. No receipt will be given, nor will there be a bill of sale. Nothing like that is provided. The gear is just taken and brought off. When the next job starts, the producer rings the HOD.
Ruairi Ó Murchú (Louth, Sinn Fein)
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It is a new DAC by this stage.
Mr. John Arkins:
Yes. The producer sets up a new DAC. He tells the HOD that he is needed and that the workshops need to be set up. All the stuff that was got for the last DAC is then brought in on the back of a truck. The workshop is set up using the tools bought for the last DAC. The new DAC is then billed weekly for the tools.
Ruairi Ó Murchú (Louth, Sinn Fein)
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It is a good set-up.
Neasa Hourigan (Dublin Central, Green Party)
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Okay. I thank Mr. Arkins and Ms Murray. This concludes this session. I thank the witnesses for coming in and I appreciate their time.
Neasa Hourigan (Dublin Central, Green Party)
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This is the second session of our meeting to consider section 481. From Irish Equity, I welcome Mr. Gerry O'Brien, president, and Ms Michelle Quinn, sector organiser.
Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. The evidence of witnesses who are physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. However, Mr. O'Brien and Ms Quinn are giving evidence remotely from a place outside the parliamentary precincts and, as such, may not benefit from the same level of immunity from legal proceedings as a witness physically present may. They are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him, her or it identifiable. I remind members of the constitutional requirement that members must be physically present within the confines of the place where Parliament has chosen to sit, namely, Leinster House, in order to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the parliamentary precincts will be asked to leave the meeting.
I remind members and witnesses that the remit of the committee is limited to the film relief tax credit expenditure. The wider industry or sector is not within the remit of the committee and any issues or cases specific to individuals or companies should not be discussed at this session. I invite Mr. O'Brien to make his opening statement on behalf of Irish Equity.
Mr. Gerry O'Brien:
On behalf of the membership of Irish Equity, Ms Quinn and I thank the committee for the invitation to submit our thoughts on the film tax incentive and for this opportunity to discuss that submission in person.
Section 481 is an important source of funding for the audiovisual sector. It has played a key role in the growth of the sector and in the creation of contract jobs for our crews, a whole new generation of animators and our members, the professional performers who populate the film and television productions that are produced in Ireland every year.
It is vital that we remember the most important stakeholder in section 481, namely, the taxpayer. Section 481 is the investment of taxpayers and it must be protected and the return on that investment optimised. With these stakeholders in mind, it is vital that the reputational, legal, and financial risks associated with the operation of section 481 are fully considered and effectively managed, and our full submission is chiefly concerned with these risks and how they can be managed.
For the purposes of this introduction, let us consider one of those risks. In the same way that contracted crews are protected by a range of employment legislation, all performers and creatives are protected by that legislation, as well as by the Copyright and Related Rights Act 2000 and the European copyright directive. However, although productions must sign a statement to the effect that they will comply with relevant employment legislation to secure section 481 investment, the Copyright and Related Rights Act 2000 and the EU copyright directive are not specifically listed in the statement. This legislation must be listed and applied in full and the rights of the performer must not be contractually overridden.
Why is this important? The real value of the film and television industry does not exist at the point of production. Rather, it is contained in the copyright and intellectual property of all the parties contributing to the final product. All performers own property rights under the copyright legislation. These property rights have a financial value to those who own them, namely, the performers, and those who want them, namely, the producers. The most important of these rights is the right to proportionate remuneration for the ongoing financial exploitation of the performance, as enshrined in Article 18 of the EU copyright directive. In order to manage this legislative risk, adherence to copyright regulation must become an eligibility requirement for section 481 applicants, if section 481 is to be consistent with Irish and European legislation. For the record, the protections provided by Articles 18 to 22, inclusive, of the European copyright directive state that the protection of authors and performers is the core principle that should inform the interpretation and implementation of said articles and that this principle implies that the articles have a binding nature and cannot be contractually overridden, except insofar as expressly permitted by the directive. Article 18 vests the performer with the right to an appropriate and proportionate remuneration for the ongoing financial exploitation of his or her work. What this means is that a small percentage of the worldwide revenue streams created by the ongoing sale of the production will find their way back to the performer. The European Copyright Society, ECS, states that these provisions have to be interpreted in a strict manner and should not serve as ways to exclude some contracts or situations from the protective provisions, to the detriment of authors and performers.
It is a concern to us, and a growing legal and reputational risk to the audiovisual sector, that Irish actors are being contracted on lesser terms and conditions than their international colleagues, as well as being denied their copyright, even though both Irish and international performers are being part-funded by section 481 taxpayer investment. To this end, section 481 must ensure that the Copyright and Related Rights Act and the EU copyright directive are implemented in full, that all agreements and contracts comply with the legislation protecting the rights of the artist, that there is greater transparency with regard to the assignment of performers’ property rights and their value to the end user as required by the Article 19 of the EU directive, and that indigenous Irish performers are engaged on terms and conditions equal to and not less than any other performer who qualifies under section 481. These steps will ensure the performer will have some protection within the negotiating process.
One of the motivations behind section 481 is the creation of quality employment.
The Olsberg report on the film industry states: "Economic net benefit is a more comprehensive measurement than fiscal net benefit as it recognises that governments do not invest to benefit their treasuries, but rather on behalf of all citizens as a means to raise standards of living." Section 481 must respect the rights of citizens protected under the copyright legislation and ensure that all performers share in the success of the industry in order that their incomes are increased and more of them enter the tax net. Section 481 must ensure that all creatives thereby benefit from a rise in their standard of living and the creation of sustainable careers in an otherwise precarious environment.
Neasa Hourigan (Dublin Central, Green Party)
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Thank you for that contribution, Mr. O'Brien. I now open the floor to Members. It is not clear to me if Deputy Doherty is on the call.
Mairead Farrell (Galway West, Sinn Fein)
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He had to step out.
Neasa Hourigan (Dublin Central, Green Party)
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I will go to you then, Deputy Farrell.
Mairead Farrell (Galway West, Sinn Fein)
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Gabhaim buíochas leis na finnéithe as teacht os comhair an choiste. We have already had quite an interesting debate. It is great to have the witnesses here.
Regarding the point Mr. O'Brien made that the real value is not at the point of production but in the copyright and intellectual property that is created, I asked the following question of the previous panel but I want to talk to the witnesses before us about it as well. According to the Department of Enterprise, Trade and Employment, "enforcement of an ... [intellectual property protection] is essential in order to preserve the legal validity of your IP rights, prevent infringement in order to avoid wholesale damage to you and your goods/service including loss of the goodwill and reputation and to seek compensation for actual damage caused." Is the State failing in its obligations to protect the IP, or intellectual property, rights of all the parties involved in bringing a film or TV show to the screen?
Mr. Gerry O'Brien:
The short answer is "Yes". We do not have a great reputation, I am afraid, for individual copyright and the protection of individuals' copyright. We are more concerned with the copyright of large industry than, say, my particular copyright or the copyright of individual performers. We do not have a great reputation in that field at all.
Mairead Farrell (Galway West, Sinn Fein)
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My next question is about the competitiveness within the industry and the concentration among the big players. That is despite the main source of funding for Irish film and TV production having come through Screen Ireland, which has loaned a lot of money to filmmakers over many years. How are we performing in respect of promoting competition and supporting those up-and-coming players?
Mr. Gerry O'Brien:
There are two things. First, you have to be very protective of where you invest the money. It is quite understandable that you need reputable players, but when someone like a young filmmaker or a young writer comes along and has an idea, how do you invest in that idea and make sure that the person holds onto those rights or, if a new company is emerging, how do you make sure he or she has the opportunity to avoid having to give his or her rights away in order to access the funding available through the established companies? We have a system that has been honed over, say, the past 25 years, and I am around long enough to have seen and to describe how the change has occurred. There are about five or six major players and they are safe hands, as far as you are concerned, and you ensure that people have to give their rights to those players, but the question is how those rights are assigned. If those players have all the power, they have the ability to make sure that the assignment of rights is not necessarily fair. We have that problem and that imbalance, which was part of what the European copyright directive deliberately set out to change. That directive was designed to recognise that individual performers and individual writers, when going to major production houses, do not have the leverage to create a fair environment for themselves.
Mairead Farrell (Galway West, Sinn Fein)
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I thank Mr. O'Brien. That is interesting.
A number of years ago, quite serious claims Mel Gibson made were reported in The Irish Times. The article stated that "a production company attempted to defraud Ireland's tax authorities". I am not making any claim in respect of that particular issue. It was just something that involved the particular film. In general, however, do the witnesses think the relief could have been used or was used at any point for aggressive tax avoidance? Again, I am not referring to anyone in particular.
Mairead Farrell (Galway West, Sinn Fein)
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Again, it is not to comment on any-----
Mr. Gerry O'Brien:
I know that. In any organisation where funding is available - and this goes right up and down any sort of funding, not just film funding - there will always be people who will attempt to take advantage of it. We have to try to legislate and work against that. By the way, Equity supports section 481. Where the Government does something to try to increase the standard of living of its people, as the Olsberg report states, rather than necessarily adding to its coffers, there are people who will be in a position to control how those revenues go. In the arts, in particular, because the most important asset to an artist is his or her copyright and intellectual property, there will always be that imbalance. Then there is the ability of people in power to believe that they are doing right whereas they could actually be damaging the reputation and the government support. We want to try to make sure that that is worked out. Yes, there is a possibility. I am not saying the practice is rampant, but in all government-supported industries, not just the film industry, we have a record of that going back. We have to be careful, however.
Mairead Farrell (Galway West, Sinn Fein)
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I thank Mr. O'Brien. If Ms Quinn wishes to comment, these questions are directed at both witnesses. I will ask my final question and then the witnesses can both come in. Ms Quinn may wish to respond on one of the other questions.
I note that Mr. O'Brien says he is not against section 481. I would be interested in hearing who he thinks is the main beneficiary of it and who bears the biggest cost at the moment and how he feels it should actually work, that is, who the beneficiary should be and who should bear the main cost.
Mr. Gerry O'Brien:
The answer to that is that we all should be the beneficiaries, but we are not at the moment. I started my career 50 years ago. I saw an Ireland where if I met somebody from the crew boasting that there was one film in Ardmore last year and that he or she worked on it, that was a bonus year, a bumper year, for people. The growth in the past 25 or 30 years is down to the stimulus the Government has given. I have not seen an increase in the quality of life of the performers or the crew to a great degree, and that is down to negotiations and a lot of other factors. We work extraordinarily hard. People see the red carpet. They do not see the hard work, the 5 a.m. calls, the long hours and the 11-hour days. They do not see all the work that goes into creating those 90 minutes on the screen. Everybody should benefit.
Now, when I say the real wealth does not exist at the point of production, that is where the hard work exists. The real wealth exists in the distribution globally. You can have a €1 million, €10 million or €100 million financial bomb in a certain location, but the real wealth then lies in the €800 million, €900 million or €1 billion in revenue that is generated from that. If we had, as our colleagues in Northern Ireland, Scotland, Wales and England and in the US and Canada have, a proportionate remuneration, as stated in the EU directive, from those revenue streams making their way back to us, we would all benefit from the success of the industry. We need to have two sectors here. We have the point of production, where we need fair play, fair hours and the working time Act. Then we have the copyright Act. That is the part where actors make their living, and that has been denied to Irish actors. I cannot say, therefore, that everybody is benefiting equally.
Mairead Farrell (Galway West, Sinn Fein)
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Does Ms Quinn wish to comment?
Ms Michelle Quinn:
First, I wish to acknowledge that section 481 provides significant investment in the audiovisual sector and, of course, we welcome that. We must also, however, have due regard to the sustainability of the industry. Within that comes a requirement to make the industry sustainable for all stakeholders, including those workers who participate within it.
Currently, that is not always the case, which is regrettable. It is about sustainability of the industry and sustainability for all. We need to have due regard to the maximisation of taxpayers' investment. We are all taxpayers and we all have a vested interest in ensuring we maximise that investment, for obvious reasons.
The third point, from my perspective, is we need to ensure there are quality jobs within the industry. There are a number of hallmarks of quality jobs but, sadly, at present some of those hallmarks are not visible to us and certainly not enjoyed by our members. It is a dynamic industry and section 481 plays a significant part in attracting interest on the island of Ireland, but we see absolutely no reason that our members should have to work for lesser terms and conditions than our colleagues in the Six Counties. If performers and crew are performing to the same standard, then we believe the rate of pay should reflect that. We welcome further scrutiny of section 481, its criteria and compliance with it because in order for the industry to benefit in its totality from that section it has to ensure that all stakeholders benefit.
I am not suggesting for a moment that every stakeholder would benefit equally but they should benefit proportionally. If we can do that, then our members will believe that our industry will be the richer for that and sustainability will automatically be achieved because it will continue to be a vibrant industry where we can hold our head up and say it is sustainable, and we see the benefit of section 481 and of taxpayers' money. The true measure of that will be the quality of jobs within the industry for performers and crew alike. The only true measurement of that is how our members fare.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank Mr. O'Brien and Ms Quinn. It is to be hoped that what they described will be an eye-opener for people. We all agree, as they do, that we want to see continued State support for film, the arts and culture but we want it to benefit performers, actors and crews. They are telling us that support is not doing as it should in respect of that.
To put it bluntly, and I asked this at a previous meeting, would the representatives agree we are in breach of the legislation regarding copyright? The way in which it is now being operated by producers means that we are quite simply in breach of copyright legislation and the similar directives from which that legislation flows - the witnesses can probably clarify that. There is a problem here with legal compliance, which is then seriously disadvantaging - I could probably use stronger words - performers from getting the value of the work they have done. One question I have in that regard is to ask the Irish Equity representatives to spell out the buy-out contract business and the pressure its members are put under to get work that means they have to, in many cases, in effect sign away their rights to their intellectual property, and the value of their performances as tied up in copyright and intellectual property. I suspect many people do not know this. Maybe they could elaborate a little on that point. I have a couple of other questions but maybe they could start with that.
Related to that, what do they think those working in the UK or other jurisdictions think about the conditions Irish Equity members have to endure here? Are they shocked when they encounter what is going on for its members here?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Please do.
Mr. Gerry O'Brien:
I will not put on my president of the union hat but my actor's hat. I have worked in Los Angeles, other parts of America, London and all over England. When I mention the type of contracts we sign here, there is an audible gasp from my acting colleagues in those countries. They are genuinely concerned that the sort of buy-out contract that exists here is allowed to exist. In the US, the industry is the success it is because there was a tough union that fought for the exploitation rights of its performers, and went on strike for those rights through the years, when those things were easier to do. They went on strike and they fought for those rights. It was the same in the UK. Up to a point in Ireland, we were mimicking what was going in the UK because I also worked under that regime as regards film contracts. People there are actually shocked. I will reference one sentence in an agreement without identifying anyone because it appears across a tranche of contracts for actors. It states that it is an agreement that is not subject to the jurisdiction of any guild, labour or collective bargaining unit agreement, and covers the engagement of the artist by the producer of the film for the compensation set forth with said compensation being inclusive of all buy-outs in all media now known or hereafter devised in all territories in perpetuity.
For an agreed figure, an actor will get a fee that is broken down into two sections. One section is the performance fee, which is what the actor gets for turning up, creating the performance and doing the job at God knows what hour and in what location. It is done, made and recorded. There is then what is called a usage fee, which is made up of various percentages for the different platforms that exist. It sounds complicated but it is not. It involves taking 280% and adding that. If an actor's performance fee is €100, then another €280 is added and that fee becomes €380. People think an actor is making that for a day's work but the trick is to divide it by 50 because that is the number of years actors own that property. It is vested in the performer for 50 years. It then begins to break down quite a lot. That fee is for all the platforms. If we then take every single DVD sale for a year, and everything right down, including all the downloads, all the sales to television, all the programmes on American and UK television and all the European television stations, etc., that contract has bought all those rights for €380, or €600, €500 or €700. Once it is a buy-out, it does not matter what other calculations are put on it. There is a ten year buy-out and a buy-out in perpetuity. Once there is a buy-out, there is no variability allowed in what actors get for the exploitation of their work, and where no variability exists there can be no proportionality. It used to be equitable remuneration but none of that can exist for actors.
I will leave the details vague, but I looked at a very large production that received quite a large amount of money from the taxpayer and broke it down in that way. The performance fee broke down to €394.73 for a week. That was a 55-hour week, however, so it worked out at approximately €7.17 per hour for those performers. The usage fee was €1,105 for a buy-out in perpetuity. When we start to break it down over 50 years, etc., it ends up at 42 cent a week for everything globally, including all the DVD sales, all the television transmissions, all the streaming platforms and everything else. It does not matter where it is sold; that is what the actor gets. It is contained within that €1,000 so it can never get better but can only get smaller. A ruling was made a long time ago that I read on a lawyer's website - unfortunately, I read these things instead of scripts now - which stated that any contract that does not have a variable component to it cannot therefore allow equitable remuneration to take place. That is the phrasing from the copyright Act. There is a section that actually covers performance rights within the legislation.
What an actor is given is a document that says the actor agrees that is what is in this contract is proportionate and adequate. An actor will sign that and sign away all his or her rights without fully understanding what they are and what value they have.
There is a whole generation of actors coming up in Ireland who have never seen a residual payment of a structured nature in their contract. That is a loss to our community. From that point of view, the Olsberg report is failing because it is not raising the standard of living within the cultural community. This is the biggest investment by the State in our industry and in the lives of actors.
I know actors who say they will not work on a film because they cannot afford it. It used to be that we would not do theatre work because we could not afford it and film was our saviour, but now we cannot afford it. That is the situation we are in. I hope that helps to explain it.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It does. It is a very stark picture and rather a depressing one, with all of this public money going in. I will fire a few more questions at Mr. O'Brien before my time runs out and I hope he can come back on them, and I know Ms Quinn also wants to come in. I understood from hearing what was said earlier that one contrast is that if someone is working on a film in Ireland just for a few days, they might then be laid off and they would have to go back on social welfare, and they might then come in for another few days and go back on social welfare again, whereas in the UK, people actually get paid throughout the period. That seems like a big contrast and perhaps Mr. O'Brien can spell out that.
Second, what happens to an actor who says, “I do not want to sign the buy-out contract”? When they do sign it, who ends up with the value of their intellectual property? Who walks off with it? The DAC ceases to exist after a year, so who actually goes off with all the money? As well as the actors getting back some of the money they should be getting, should the State be getting back some of that money because of its investment through section 481? Who actually gets it?
Irish Equity mentioned in its longer submission that there was potential abuse of tax credits through a range of practices, including internal pricing and artificially depressed income strategies, which sounds pretty ominous. The witnesses might spell out what that means.
Mr. Gerry O'Brien:
I will deal with the first issue and Ms Quinn can step in at any time she wishes. The Deputy referred to signing on and signing off. The UK film industry has what is called a guaranteed period of work, which is an actor's first core period of work. If actors have a six-week job on a film, they may be booked from 1 January right through to the middle of February, where the first week is a full week and they get paid for that, and in the second week they might do three days and they get paid for that. In the third week, they might just do one day. It has been worked out that someone might not survive with what he or she is going to get for one day, so there is a negotiated supplemental payment that applies to the week where the person works only one day, because he or she is losing out on potential signing-on days. There may also be a week where the person does not work, and there is a supplemental payment for that.
What the film company is doing is engaging and employing someone for the full length, from week one of the actor’s first call until the last week of the first call. It is divided into seven-day periods and, for example, the first seven-day period could start on Wednesday and finish on a Wednesday, and they work it that way. With good scheduling, it works for the producer and if the scheduling is loose but they still need you for the film, it works for you. What that does is it prevents the producer’s scheduling needs being subsidised again by social welfare, and it also means the actor will be engaged and employed for a longer period. The supplemental payments are not much more than, say, whatever the actor’s negotiated minimum performance rate would be. That is sometimes capped, so it is not a huge amount but is enough to be a bit more than the social welfare. That means the actor will have six weeks of contributions rather than broken contributions of maybe one day a week, or whatever. That benefits the State because the State is not subsidising the scheduling needs of the production or the television series and it is taking people away from that, so that is a good thing. It benefits the performer later on because he or she will have those credits.
As to who owns the rights, that is the $64 million question. When I sign my rights into the DAC, there is no written information for me as to where they go, and they could go anywhere because rights can be assigned anywhere. It is just a line on a page that all rights are assigned to this company, and the company can assign it on and on. It is generally an end-user who will get it. In the case of the big streaming companies, they want all of the rights, even from the producers, so that is a difficult area. We are both suffering there. It is just that we are suffering a bit more when the producers are doing it to us.
As to what happens to the rights, they have a value, as I said, and whoever owns them, that is where the revenue stream will go. It says in the copyright Act that the benefit of those rights goes to whoever they are assigned to, so how they are assigned is important. Therefore, at the contract level, it has to be stated, “If this much is made, a percentage is coming back here, and there will be so many transmissions on television” and so on. All of those are worked into the document that should be the basis of the film agreement or television agreement and the industry agreement. As to what happens to the rights, as I said, I do not know.
Neasa Hourigan (Dublin Central, Green Party)
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I am sorry to cut across Mr. O'Brien. A vote has been called in the Chamber and I have to suspend the meeting. I hope Mr. O'Brien can come back when we resume.
Neasa Hourigan (Dublin Central, Green Party)
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I apologise to the witnesses for that interruption for the vótáil. I am glad they are still with us. Deputy Boyd Barrett might wish to rephrase or reiterate his question.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Mr. O'Brien answered many of the questions. I had asked what happens to actors and performers who do not want to sign a buy-out contract? How likely are they to get work if they were to say something like that? I asked the question about something in the executive summary of Irish Equity's main submission which our committee should certainly take very seriously. It pointed out that the risks with section 481 include potential abuse of the tax credit through a range of practices, including internal pricing and artificially depressed income strategies. That sounds quite ominous. It made similar references to problems with the entire DAC structure and a potential for abuse within the DAC structure. I would like to get elaboration on that.
Ms Michelle Quinn:
I thank the Deputy for his questions. He asked what happens to workers or performers who do not sign the contract. The likelihood is that they will lose the opportunity of that employment should they fail to sign on the dotted line. That is the sad reality of the situation, I am reliably informed by our members.
Rightly or wrongly our members are of the view that the directive as it currently exists does not provide the full protections that it might. They have that view because the buy-out in Ireland is the norm whereas the intention of the directive is that the buy-out would be the exception rather than the rule. Article 19 covers transparency. Regrettably, we are not able to say whether the remuneration is fair, equitable and proportionate because we simply do not have the level of transparency to be able to answer that question. However, people are being asked in some cases to irrevocably sign away their rights for the privilege of working.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank Ms Quinn and Mr. O'Brien.
Patricia Ryan (Kildare South, Sinn Fein)
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I thank our guests. I will initially ask two questions together. What are the strengths and weaknesses of the section 481 tax credit? Beside section 481, what other changes are necessary in a budgetary context within the industry?
Mr. Gerry O'Brien:
The strength of section 481 is that it provides the biggest investment in the cultural sector in Ireland. It is very important to all our crews, animators and actors who get work. That is the strength. It also has a very significant soft diplomatic benefit to Ireland because foreign producers and actors like to come here. It spreads the name of Ireland all around. As I said in my opening statement, there is a reputational risk. We have a great reputation for caring about our artists, writers etc. However, when issues are mentioned about the engagement of artists and the protection of their rights, people abroad may say, "Now we have a problem." Our reputation is tarnished by not allowing our actors to be treated equally on the open market, as every other performer is. That is one of the weaknesses.
The strength is that it provides employment. We just need to make sure that it is, as the legislation states, quality employment, that it is sustainable and that it raises everybody's standard of living. That is what we need to strengthen. We do that by applying the legislation rigorously. As stated in the EU directive, there must be no deviation from the protection for performers in office. Those are the weaknesses.
The Deputy asked what we need to do from a budgetary point of view. We have suggested it. The legislation is there and it needs to be applied.
I want to say this. I am speaking as president of a union, Equity, but this does not only apply to members of the union. It is not about that because it does not say that proportionate remuneration must go to members of Irish Equity. This is about the rights of Irish citizens. They are the people who are investing in the film industry and their return must be the quality employment. They must ensure that we will not lose our talent by going abroad constantly. We are told we have to look to Los Angeles and we have to look to London. We can look to here. We have a beating heart of creativity and we must protect that within this industry. If one sucks it dry, there is no industry; there is just a shell. We have to put that dignity of fair employment back into the heart of that industry. That is what I would suggest. The legislation is there; apply it.
Patricia Ryan (Kildare South, Sinn Fein)
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In a recent statement, Equity is looking for changes to drive innovation in the audiovisual sector. What kind of changes and how specifically might they be supported?
Mr. Gerry O'Brien:
First of all, the producers are looking for some more leeway within the grant. That is important. We would have to look at how we protect - I will go back to the copyright legislation - because that is the value or the gold. That has to bring revenue streams that are going on locally back into this jurisdiction because it has its own wall that has been built around it and revenue streams are diverted everywhere except to here.
In doing what we suggest, it means that the investment is not attached to any local company. It is attached to the film itself and to those revenue streams. One has to make sure that even where producers would have such revenue streams, any copyright they have which is raised through the investment of section 481 must come back to this jurisdiction and has to be registered here. Those would increase the value to the State and to the cultural sector.
Patricia Ryan (Kildare South, Sinn Fein)
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I thank Mr. O'Brien.
Ms Michelle Quinn:
If I could interject in relation to the benefits of section 481, it undoubtedly supports the industry in terms of tax concessions and we welcome that. The downside is that it needs to be sustainable for everyone and currently the performers and crew are not benefiting to the extent they should in relation to sustainability. Clearly, if a person is not able to survive within the industry in terms of earnings, in reality, it is not sustainable for him or her. That is a real concern for me.
In relation to what we can do on the budgetary front, greater scrutiny of compliance with the criteria of section 481 would help considerably to ensure a more level playing field in the first instance. It would also reduce the risk of reputational damage.
In relation to the taxpayer, if the directive on copyright and buy-out was being used as the exception rather than the rule, as, we believe, was intended by the directive, that would also maximise investment for the taxpayer because it would bring somewhere in the region of 500 to 1,000 people into the tax net who are not currently within it because they do not have earnings to justify their inclusion. It would also reduce or remove the need for reliance on additional social welfare payments for people within the industry. There would be a win-win situation for the taxpayer and the industry in terms of sustainability for all stakeholders and this would ensure a standard of living for the performers and crew that is proportionate to what they bring to the industry.
Patricia Ryan (Kildare South, Sinn Fein)
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I thank both guests.
Ruairi Ó Murchú (Louth, Sinn Fein)
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I thank Mr. O'Brien and Ms Quinn. I also thank the committee for dealing with this issue.
I understand that Irish Equity supports section 481, albeit with a significant number of caveats. Anybody listening in on this would have significant worries and caveats in relation to section 481. In fairness, Mr. O'Brien largely dealt with the issue of copyright. Ms Quinn backed him up in the sense that if one does not sign, one does not get working. That is hardly fair. Obviously, legislation seems to be the only means of dealing with a proper protection from the point of view that the directive is not sufficiently strong to cut the mustard.
If we could deal with section 481, something Mr. O'Brien said that we dealt with to an extent previously is the possibility of, for the want of a better term, fraud and the need to curtail this. Mr. O'Brien might give a general outline in that regard. Also, a good point made was that we are talking about securing the taxpayers' investment where people understand that to provide a return. It is not only a working sustainable industry and we are talking about intellectual property and a net result in some cases which will have a valuable stream of revenue. It would make sense, if the State invested, that it also got moneys back. These could be moneys that are used to make the overall industry more sustainable and to ensure we have an adequate supply of actors and crew who are looked after properly. We will not be able to produce many great films if we do not have those two anyway.
Mr. Gerry O'Brien:
With every State-subsidised industry, as I said, there is a tendency to see this as free money that nobody will miss. I am not saying anybody is doing anything criminal, illegal or anything like that, but there is a stretch on how one costs things, how one values them and how they give a return. There is a phrase in the accounting world where there is accountancy and then there is Hollywood accounting. The joke goes - I forget which writer said it - that the most creative aspect of the film industry is, in fact, the accounting. One has to be very careful in anything that one supports with other people's money. I believe I am speaking not only on behalf of actors but on behalf of the taxpayers because, as I said, it is their investment. It does not belong to the producers or to the actors; it belongs to us, the taxpayers. We have to be satisfied that all legislation is spot on and everything is valued correctly. If one has a multiplicity of DAC companies springing up and then ending, one does not know where any of those assets are going and that is where one gets the possible suppression of value.
The big suppression of value is in the value of the performers and that has gone on for 30 years. For example, I worked on an American contract in 2006 and I am still adding $3,000 a year to my tax return here in Ireland because the revenue comes in to this jurisdiction to me. The Olsberg report does not state we want to measure fiscal improvements. It wants to look at the net benefit. If one has actors earning those residual payments and they are protected, they are taxed here in this jurisdiction. If you protect all creators of copyright, and copyright goes across everybody, not only performers but also our writers, the screenwriters should be getting this. The cinematographers, producers and directors all have an intellectual investment in the industry. We also have to make sure of it for our own cultural sector, the Irish film industry itself, not the service industry to the big global streaming networks and the big US studios. It is a great benefit to them and that is a great boon to us. We have to make sure that we get our share of the global revenue streams of that. That is how it works.
It means there is a raising of standards of living and the actor is not constantly dependent on handouts. I mentioned the excellent basic income scheme. There is more dignity to an actor getting a cheque through the door as validation for his work than having to depend on something given to him because he is so poor. It gives dignity back to the actor and that is lacking at the moment. There is a huge lack of dignity at the core of this industry. I hope that helps to answer the Deputy’s question and helps him to understand.
Ruairi Ó Murchú (Louth, Sinn Fein)
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It definitely does. For that intellectual investment, it is about ensuring intellectual payment for the likes of Mr. O'Brien, as well as for the taxpayer, rather than the money going into a DAC, the DAC disappearing and the value being owned by an entity we are not sure of. We should make sure we do the due diligence so actors are looked after, as well as the taxpayer, and ensure we have a sustainable industry with the money we are putting in.
Ms Michelle Quinn:
I thank the Deputy for his questions. On any suggestion of impropriety, we are not suggesting that is reflective of the industry. However, if Mel Gibson's observations of the industry as he found it hold water, as taxpayers and responsible citizens it behoves us all to ensure any potential for impropriety in the industry or in any location is limited and, ideally, curtailed.
Ruairi Ó Murchú (Louth, Sinn Fein)
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A better system with all the checks and balances.
Neasa Hourigan (Dublin Central, Green Party)
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I appreciate the centering of the taxpayer's investment in this discussion. It is really worthwhile. I welcome the use of the word "sustainability" because part of the reason we are having these sessions is that we want to see in this country an ecosystem of Irish talent that upholds a self-sustaining industry involving Irish writers, Irish actors and the whole gamut of skills.
It strikes me from the conversation today that it is not just contracts and tax but also work, training and a huge spectrum of stuff included under section 481. We talk a great deal about oversight at this committee. What would Irish Equity identify as the key bodies in industry oversight if checks and balances were to be taken on?
Mr. Gerry O'Brien:
We touched on that in our submission. If Revenue is involved, we should have a contact for Revenue because the industry is financially complex and at times there is a misunderstanding as to its purpose. Is it for profit for a handful of privately-owned SMEs or is it for what it is supposed to be for, which is to stimulate employment, growth and expertise?
Valuing of property is something that should interest Revenue. Many years ago I had a conversation with an actor who said “Gerry, I wouldn’t mind paying loads of tax. Could you imagine what I’d be earning?” If that sort of value is put back into individuals in our industry and community, then we should have a liaison with Revenue because that is the body putting money in on behalf of the taxpayer.
On training and infrastructure, there is an over-reliance on cheap labour using interns and trainees, and that can overpopulate a situation. We have to get back to the balance. One of the great things I had as a young actor was working with older actors who were hugely experienced. That is where I gained most of my experience. It is the same for crews working in a specific area like film because there are nuances to what they do. They say such a person is a carpenter but a carpenter for a house has different skills to a guy building a set for a film. It has to be ensured experience is married to upcoming writers, directors, performers, carpenters, crew and electricians, so they all benefit from the experience. The over-reliance on trainees, interns, etc., is something we should watch and be careful of.
Ms Michelle Quinn:
I will make an observation on what we might need to do. There is a strong desire among our members, whether in film and entertainment as crew, performers, etc., to do right by the industry in the most honest terms; there is a corresponding desire for the industry to do right by our members.
A mechanism we could use going forward is a stakeholder forum where we would legitimately look at how we collectively as stakeholders in the industry can extract more benefit from section 481 across the board. There is a fruitful and worthwhile discussion to be had, although a hard discussion is needed concerning putting in additional protections to ensure the maximum benefit from the section for taxpayers, workers and other stakeholders. I would welcome that opportunity if it arose.
Neasa Hourigan (Dublin Central, Green Party)
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I thank Ms Quinn for that suggestion. It is a very interesting one which we might pursue.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The arts committee in 2018 recommended such a stakeholder forum. It should have happened but never did and we are the worse for it. It should happen as a matter of urgency.
The DAC structure seems incredibly problematic. They are like mushrooms jumping up and down. They appear, disappear and make the whole thing opaque. You do not know where your intellectual property rights are gone. Nobody quite knows who the employer is. Nobody wants a cent less going into film; in fact, I think we want all the money going into section 481 and more to go into stimulating the sort of industry witnesses have described and would like to see, with dignity for all involved and experience, gelling into a growing and developing industry. It seems to me the DAC structure and the way we are funding via section 481 militate against that. If there were a model that had the same amount or more but that did not go through this opaque, complex structure and was done in another way, maybe more directly funded, might that not be better? Connected to that, would we learn a bit from talking directly to film producers? We have never had a chance to talk to them in all of this. The witnesses say they do not know where their intellectual property is, while our previous panellists said we should ask the film producers. Nobody seems to know but somebody must know. I thank both witnesses.
Ms Michelle Quinn:
I will respond to that briefly and I am sure Mr. O'Brien will have a number of things to say about it. We would welcome any mechanism other than the current one, as long as it brings more transparency, accountability and equal treatment of all stakeholders. If that means that we have to look at a new model, then it is within the gift of a stakeholder group or forum to do just that and I would welcome that opportunity. As to where that conversation might take us, it is up to the parties and the stakeholders within that forum to determine the destination but we would certainly wish to be part of the journey. We have a responsibility to the taxpayer, to our members and to the industry to do nothing less than a thorough piece of work on how we make 481 even better than it is currently. If we collectively achieve that for the industry, that will be a good day's work.
Mr. Gerry O'Brien:
I agree with that. The 481 system was simply a tool of convenience really. It worked for a period but we are now seeing the problems in it. We did not look too far down the road initially but it actually prevents the provisions of article 19 on transparency, which is demanded by the EU directive, from occurring. Deputy Boyd Barrett is quite right that the DAC disappears and there is no tracking. I spoke to my friends in England who had a similar incident with what they call special purpose vehicle, SPV, company that closed down. They lost all of the deeds of title to where the rights went but they managed to reopen it. The DAC was not just gone; they managed to reinvigorate it and got their settlement for the actors. It was quite a substantial settlement and it was agreed on the steps of the court because they did not want us to pursue where the DAC had gone. It is a flawed tool and it was a tool of convenience. I agree that we could probably look at a better structure but it is the only one we have now. To mitigate it, we simply have to go back to legislation and make sure that the EU directive on transparency applies to the DAC at the point where it is being wound up. We have to know where everything is going. It has to be presented to us in writing.
Neasa Hourigan (Dublin Central, Green Party)
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Okay. Thank you very much for that answer.
We have reached the end of this session. I apologise for the interruptions and thank Ms Quinn and Mr. O'Brien for taking the time to talk to us tonight. It was a very useful conversation. That concludes the session. We will adjourn until 12 October when we will continue our discussions on the film credit.