Oireachtas Joint and Select Committees
Wednesday, 18 January 2023
Committee on Budgetary Oversight
Film Relief Section 481 Tax Credit: Discussion (resumed)
I would like to welcome Ms Mary Nash and Mr. Anthony Donnelly from the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media and Ms Deirdre Donaghy and Mr. Ian Kavanagh from the Department of Finance for our continued examination of the section 481 film credit. I thank everyone for attending. We appreciate their time.
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 physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. Witnesses are reminded of the long-standing parliamentary practice 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 witnesses' 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 or her identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the place in which Parliament has chosen to sit, namely, Leinster House. I will not permit a member to participate in meetings where they do not adhere to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting.
I invite Ms Nash to give an opening statement.
Ms Mary Nash:
I thank the Chair and members. On behalf of the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media, I thank the committee for this evening’s invitation. Mr. Donnelly and I are delighted to have the opportunity to help the committee.
Almost all member states of the European Union offer tax incentives for the development and promotion of their audiovisual industries. Australia, New Zealand, Canada and the United Kingdom, as well as many individual states in the USA, also offer incentives to internationally mobile film productions. In Ireland, we have had a film tax relief since the 1980s. Over the years, the tax relief has been modified many times. In this context, 2019 witnessed the most significant changes in the relief for a generation, placing the emphasis firmly on individual and industry skills development.
The examination of the qualifying conditions for section 481 is undertaken by the Department's film unit. Before a section 481 certificate can issue, officials carry out a range of tests, including an industry development test, a culture test, a producer company and track record test, a check on dates of commencement, length of production, a category test, checks on the budget and a state aid compliance test.
An application for section 481 is only made after a project has spent a long time - often years - in preparation. All financing must be in place and provided to the Department along with an itemised budget, a full script, a person days schedule listing the individuals who will work on the project, the number of days and their payments, a detailed training plan agreed with Screen Ireland when eligible expenditure is over €2 million, and many other documents. As a result, it is to be expected that the failure rate would be low or non-existent. Over the past seven years, 27 projects have been formally refused a certificate. Of these, 17 were deemed to have met the conditions at a later date and subsequently received certificates. The Department provides advice to potential applicants in advance of application, if requested, and also expects applicants to engage and address issues with applications.
In 2019, the industry development test was changed to place a specific emphasis on creating a highly skilled audiovisual workforce in Ireland. The old training system was replaced and the focus is now on upskilling, training and life-long learning, with individual participants being upskilled at all levels. Our brightest and best are given opportunities to shadow internationally acclaimed film directors, producers and other lead creative roles. This is a precondition of receiving a certificate under section 481 and it has been a game changer over the past three years. Other EU countries, having expressed admiration for this model of structured skills training linked to the tax credit, are seeking to emulate it.
In the period 2020 to 2022, 317 certificates were issued to 124 different producer companies. The 317 certificates comprised 85 for animation projects, 78 for films, 91 for television dramas and 63 for creative documentaries. Of the 124 producer companies, 69 received a certificate for just one project in this three-year period while nine companies received certificates for six or more projects. Of note are the 29 certificates issued in respect of visual effects, VFX. In recent years, growth in postproduction, VFX and special effects, SFX, has seen Ireland emerging as a leading hub underpinned by a highly skilled talent pool. Irish VFX work is now globally recognised, competing at the highest levels internationally and nominated for BAFTAs, Emmys and Visual Effects Society awards.
Passing the culture test requires a project to meet at least three of eight criteria. Over the past three years, 78 projects, or 25%, met three criteria, 82, or 26%, met four criteria, 87 met five criteria, 58 met six criteria and 12 met seven criteria. None met all eight.
As a dignity at work initiative, the Department is rolling out the Safe to Create programme, which aims to eliminate damaging behaviours such as bullying, harassment, humiliation and victimisation from the audiovisual sector and, indeed, all creative workplaces. We have developed three online courses: tackling bullying and harassment; unconscious bias; and bystander intervention. These are being incorporated into the section 481 upskilling system with the intention that everyone in the industry will ultimately undertake all three courses.
The Department's approach is consultative and collaborative and, in concert with Screen Ireland, we engage with stakeholders across the audiovisual industry. This approach was intensified during the pandemic years when industry forums were held via Zoom on various issues including sustainability in the industry and increasing gender equality, diversity and inclusion. A process of engagement on copyright is planned to be undertaken over the coming months, with inputs invited from all relevant stakeholders.
In Ireland, productions are made possible only because of funding from section 481. There is a symbiotic relationship between incoming productions and the indigenous industry, with inward investment providing the key to developing the latter. Large incoming productions not only provide employment and investment, but bring a level of expertise and opportunities for talented Irish cast and crew to work at a level that would not otherwise be possible or available in Ireland. Our audiovisual industry crucially supports the dissemination of Irish culture and language, creating opportunities to export Irish culture on screen.
I accept that this overview touches only briefly on section 481, so we are happy to take questions.
Ms Deirdre Donaghy:
On behalf of the Department of Finance, I thank the committee for the invitation to discuss the section 481 film tax credit. As the committee will be aware, we appeared before it to discuss this topic on 22 June. We have followed the subsequent hearings on this subject matter closely and have noted the diverse range of issues raised by the various stakeholder representatives with the committee. During our previous appearance, we discussed issues relating to industrial relations at some length. Therefore, the focus of this opening statement will be on the other matters that have been raised during those hearings, in particular the regional uplift and the recent cost-benefit analysis conducted of the relief.
Ireland has an international reputation for excellence in the arts. It is Government policy to support the arts sector and to support engagement in arts, culture and creativity by individuals and communities. Section 481 film relief is a policy tool that contributes to the achievement of this goal. Section 481 provides relief in the form of a corporation tax credit related to the cost of production of certain films. The credit is granted at a rate of 32% and is available on qualifying expenditure of up to €70 million.
In order to enhance the relief, the Finance Act 2018 introduced a short-term, tapered, regional uplift for productions being made in areas designated under the state aid regional guidelines. The purpose of the regional uplift is to support the development of new, local pools of talent in areas outside the current main production hubs to support the geographic spread of the audiovisual sector. The uplift originally provided an increased level of credit for four years, with 5% available in years 1 and 2, which were 2019 and 2020, 3% available in year 3, or 2021, and 2% available in year 4, or 2022. However, in recognition of the detrimental impact the Covid-19 crisis had on the audiovisual sector, the Finance Act 2020 amended the regional uplift to provide for an additional 5% year in 2021. In effect, the purpose of this was to replace the incentive year lost as a result of the Covid-related public health measures. The tapered withdrawal of the uplift then continued in 2022 with the planned reduction to 3%. It has reduced to 2% this year and will be unavailable thereafter. The core 32% film tax credit will remain available to qualifying productions in all areas of the country following the winding down of the uplift.
I am aware that other attendees at the committee have advocated for an extension of the uplift beyond the current end date. In this regard, it should be noted that the uplift is an approved state aid. The premise on which it was notified to the European Commission was that it would be temporary in nature and would be withdrawn on a tapered basis. If the uplift were to be changed or retained for a further period, this would require a further notification process with the European Commission. In addition to the policy considerations of such a proposal, some technical matters would also need to be addressed. For example, the regional aid map upon which the uplift is currently based has expired. Commission approval has been received to continue to reference the current map until the regional uplift, as currently designed, ceases.
A new regional aid map is now in place, which, if it were required to be used for any further extension of the relief, would cover less regions than the map that currently underpins the scheme.
To return to the film credit as a whole, in advance of budget 2023, the Department conducted a cost-benefit analysis, CBA, of section 481. The CBA was prepared using data provided by the Revenue Commissioners and by colleagues in the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media. The CBA includes an overview of productions certified; the levels of employment in section 481 productions based on applications for certification, including information on employment and skills development; and gives breakdowns of productions’ expenditure and the cost of the relief. The CBA is an examination the economic cost and benefits of the scheme, taking into account standard estimates of the shadow price of labour, the shadow price of public funds, and grant dead weight. It only incorporates quantifiable benefits directly attributable to the credit, such as taxes on direct wages and indirect wages, social welfare savings, value added tax and corporation tax. Other benefits to the State, such as, for example, accommodation expenditure by production cast and crew, trickle-down spending in the local economy or increased tourism following the production of internationally successful projects in Ireland, are not captured by a CBA.
It should also be noted that, while the relief has a cultural objective, a CBA cannot capture the social and cultural returns it provides. The projection of Ireland and Irish actors, directors, cast and crew internationally, conveys the message that Ireland is a country with a rich history and a thriving cultural community. These cultural benefits, or the cultural dividend, cannot be quantified and included in a strict economic analysis. The CBA presented a net economic cost of €78.5 million for the relief in 2020.
I again thank the committee for inviting us back to discuss the relief. We are happy to take any questions members may have.
I thank our guests for attending and for their useful address. In general, what is the extent to which our guests have been satisfied with the workability of section 481? There have been various reports, some of which are hard to quantify and so on and so forth but, in general, have there been complaints? Are there ongoing complaints? Is it possible to identify any such complaints? I am not asking this in a negative way because I am in full agreement with the need to encourage the film industry, and the arts in general, as well as everything else, in a way that is positive, constructive and workable. My first question relates to section 481's intended workability, its progress to date, and whether those involved are satisfied with its progress. In addition, having regard to those involved in the industry, what has the general response been? Are the officials satisfied that any changes required have been made in such a way as to be seen to be responding to any concerns?
Ms Mary Nash:
I thank the Deputy for that question. I will respond regarding complaints I have received. We are constantly changing section 481. Many changes happen because of things that come up. For instance, I referenced the very dramatic change we made to the industry development test in 2019. Deputy Boyd Barrett was instrumental in that because he raised issues around training and how it was that trainees were constantly being trainees. We have now moved far away from that position in that we have identified all the roles in all the departments, with very specific statements about what is needed to be in each of those roles, including how someone would or would not be a trainee. That is my first point.
Of course, we get requests for changes or enhancements to the relief. My colleague mentioned the regional uplift and the cap but these are primarily matters for our Minister or the Minister for Finance. However, when we make changes, we try to make them as streamlined as possible. In 2018 and 2019, there were many complaints about delays. We changed the way the application process took place as a result. The production companies are now much closer.
We have also spent a lot of time, particularly during the pandemic years, talking to everybody, including workers, guilds, employers, and Screen Producers Ireland, SPI. More recently, as members are probably aware, there has been a coming together of all of the industry, particularly the creative guilds, SPI and RTÉ, regarding the content levy, although that is not a matter for this committee.
Does anybody else wish to respond? For instance, I see a significant area of possibility in the film industry selling the country, which would be of benefit to all the participants in it, including actors, producers and even extras, and their ability to avail of the opportunity to become involved in the industry and make that count. In particular, I have spoken previously, as has everybody else, about our scenery. In this country, there is almost unique scenery in various counties. Every county has very worthwhile scenery. My question relates to the degree to which we can encourage film-makers to come to this country as well as making it possible for the indigenous sector to grow and avail of the relief in order to expand the industry. This includes the expansion of employment, the industry's importance, and the skills available to those involved in the sector in a way that can be recognised internationally.
I remember, as we all do, some years ago that if we were on an airline going to anywhere in Europe, and various other parts of the world, we could not miss Irish music artists on the aeroplane's intercom, which indicates the value of Irish culture. Committee members will remember the men and women involved in that. Women artists in particular became synonymous with the country and its culture. It was a great selling point. Along those lines, I am inquiring as to the extent to which a further expansion can take place in the film industry in a way that furthers the presentation of the country at home and abroad.
Ms Mary Nash:
I thank Deputy Durkan. He is absolutely right about the ability to sell the country abroad. I am sure members have seen some of the very recent films that have just come out over the past six months. All we need to do is look at them to realise how dramatically wonderful our scenery is. Those elements the Deputy talked about are harder to capture. My colleague, Ms Donaghy, mentioned that while the cost-benefit analysis picked up on many things, it did not pick up on that.
The committee is aware that Screen Ireland has commissioned a report on the culture of dividends. It will make that available to the committee over the next few weeks. That may answer some of Deputy Durkan's questions.
I thank the witnesses for attending. Every time I contribute, I notice that I am quite short and that half my face cannot be seen on the screen. I have a number of questions. We have been dealing with this for quite some time. One thing sticks out from the concerns we heard the workers raise. Does the Department have a definition of what good-quality employment is? We heard from people who were working in this sector who did not feel they were working in good-quality employment. Does the Department have a definition and what is it? Whichever Department feels that fits its remit better could answer.
Ms Deirdre Donaghy:
I will address a couple of issues. I am sure Ms Nash will have a different perspective. She would have much more day-to-day engagement with the sector. We tend to look at it from the perspective of the overall functioning of the credit. As Ms Nash mentioned, issues regarding employment have been raised over the past four or five years through this committee and the Committee on Finance, Public Expenditure and Reform, and Taoiseach, by Deputy Boyd Barrett, through parliamentary questions and so on. Because of that, we have met with many representatives and representative bodies in the sector. We have made an effort to try to hear all the voices.
One thing that I think is useful in trying to understand the position is when I look at employment in the film sector, I would not be happy working in it because I like to have a desk with a box with my shoes under it. In addition, I look to go to the same place every day. For that reason, I am not responsible for our creative culture because I would be bad at it. To some extent, we have to recognise that we cannot impose our views on how the sector works. Having said that, we equally do not want a sector that does not provide quality employment within the bounds of how that sector works globally. The CBA we did contains a great deal of information on productions and how they work. There is a chart that shows how much time in productions is spent on pre-production, production and post-production. When I think of a job, I tend to think of something continuous. If people have copies of the CBA with them, there is a production duration chart on page 26.
In 2021, on average, about a quarter of the time was spent in pre-production, about a third of the time in production, and what is left, about 14%, in post-production. Not everybody is employed for all of that. There is a small number in pre-production. Peak employment is during actual production. It tails off to a much smaller number in post-production. Nothing we do can change that. That is just how an audiovisual production is made. It will differ, with animation being much longer term and live action being much shorter.
What does quality employment mean within that structure? There are different voices and opinions, including those of employer representative bodies. Some are looking for more steady or continuous employment. Others will come to us and say what they liked about the industry is the fact that they can move from project to project, that they can choose to take time off or to work on different types of productions. In the context of the industry as it operates globally, quality employment means that there is a steady supply of employment. People know that they can take on a job for three weeks or three months then, when that comes to an end, they can decide to take three or four weeks off because they know they will be able to get another job after that. The consistency of the pipeline is what we are told is quality employment in that sector.
Much has been done, as Ms Nash stated. There were concerns that when the focus on industry development was on training, people would be training forever. That is not good. That is why the focus has now moved more to lifelong skills development. Once people have been working for certain length of time, it is recognised that they have moved up the food chain of the particular area they are in, for want of a better word.
Ms Deirdre Donaghy:
The design of it makes sense for how the industry works. I know much ongoing work is being done. DésiréeFinnegan from Screen Ireland and people from Screen Skills Ireland were in to speak to the committee. They would know more about the detail. Much has been done to make sure that there is ongoing, tracked development of skills.
The CBA states that there are approximately 21,000 jobs in the industry and that over half of these are for extras. That equates to 2,300 full-time equivalents. How many individuals are employed across the sector excluding extras? Does the number of extras inflate the number of full-time equivalents?
Mr. Anthony Donnelly:
It is the three-year period up to the end of 2022. The number of employments was 21,612. The number of main cast was 1,218. The number of support cost was 2,875. The number of extras was 34,493. I have the figures per year if the Deputy wants them. That is the three-year aggregate. Those are not the full-time equivalents; they are the total number.
Ms Deirdre Donaghy:
If the Deputy has the CBA, she will see the breakdown of the figures on pages 28 and 29. I only have full-time equivalents up to 2021. There were 3,265. Extras would be a factor in that because full-time equivalents basically take all the length of time of individual employments, adds that, and turns it into a full-time equivalent number.
All of the crew, cast, support cast and extras would factor into that.
I will say one thing on these figures that have been alluded to. We are talking about 3,265 whole time equivalents and that includes extras and that over a two-year period that is 34,000. As we know, extras are not people who are really employees of the industry. They are people who may come in and out so they can be discounted as being part of a permanent creative pool that is supposed to be supported by State aid. I do not know what that figure comes down to if they are taken out, but it comes down considerably. We are down to quite a low figure of people, probably around 2,500, which interestingly enough is not much different from what it was in 2018 when we first started to look into all of this. Let us remember that at the time the representatives of the industry, including representatives of Departments, said there were 17,000 people. We then got to the truth and it was a lot less. First, I ask people to bear that in mind. It is a very low number of people. One of the groups that claims to "represent" the people in the industry, which is a private company that gets money from Screen Ireland, claims it "represents" 2,500 people in the industry. That means it represents everybody in the industry. Who does SIPTU represent? Who does Irish Film and Television Academy, IFTA, represent? Who do the craft unions represent? The numbers do not add up. Everybody is claiming to be representative.
I would ask serious questions about all of this. Ms Donaghy said that she would prefer to have a job where she knows she has her desk and some sort of security. Why on earth would one imagine that of anybody, unless they are doing very well? There are a few people in this world who can say that they worked for eight weeks and made so much money that they can take a couple of months off and know that they will then get another job. There are a few people like that but very few and that is not viable for the vast majority of ordinary people. Let us not pretend that is the case for artists and performers, because it is a unique characteristic of the industry that that is a viable reality for the vast majority of them. We had testimony from artists' representative groups that most of them live in poverty. It is ridiculous for people to come in here as they have and say that is a viable employment situation when they have no clue. Even though they may have worked in the industry for 20, 25 or 30 years, they have no clue and no right to expect that they will get another employment from one employment to another. None. We have had clear testimony to that effect from the producer companies who get the money. They have told us that they cannot be the employers and that they have no employment relationship with people. Unless the witnesses know different, they told us that there is not a single worker on film production who has a contract of indefinite duration, not one. We had a fairly high-profile case about RTÉ about the same issue that was brought in here by film crew working on "Fair City" in the news recently. That will be adjudicated and so on but this is a serious issue because it is coming up and up again.
I am referring to people who have worked on an RTÉ production on a series of successive fixed-term contracts but who were told they had no right to a contract of indefinite duration. We have had testimony at this committee from the producers acknowledging what the crew told us, which is that not a single worker has benefitted from the provisions of the fixed-term workers Act even though those same producer companies have to sign a declaration saying that they have to comply with this Act. If one parses what they have said it is clear that what they are saying is that under no circumstances could the fixed-term workers Act ever apply and yet they signed a declaration saying it would. I just do not see-----
Ms Deirdre Donaghy:
I do not assume that anybody else wants to live a lifestyle like mine. If we all wanted to same things life would be very boring. It certainly is not the case. If you have someone who has intermittent employment like that and has no certainty they will get another job, it is very precarious. It would not be a good place. In that instance what it comes down to is whether a person has a certainty of his or her next employment or that there will be a pipeline of jobs coming through. What we hear at the moment is that there is more demand than there is supply of labour in the sector and that people with skills are in high demand.
Regarding the representative groups, we make a point of engaging with them and with Screen Guilds of Ireland, which the Deputy referred to, which came in also and spoke. I know the Deputy said they claim to represent 2,500 but I do not doubt them in that. Where there is 3,265 full-time equivalents in the sector we have explained how that is calculated. That does not mean 3,265 people but that is, particularly when extras are put in, potentially 15,000 or 20,000 people who are working for some element of the year. It is not in any way surprising that there are 2,500 individuals who work as crew in the film industry and who would be represented, and it is their choice to be represented by Screen Guilds of Ireland. I assume there is overlap with those represented by SIPTU. They have every right to be represented by them so I do not see any lack of reasonableness in those numbers. They have a right to be heard, to put forward their opinions and to express how they want their career to go forward.
As to whether people are the employers, I know we have talked about this extensively and Deputy Boyd Barrett has mentioned there is potential in employment law for the Workplace Relations Commission, for example, to look through connected companies. There are extensive protections out there for employees and I think the right place to bring disputes is to the employment relations arms of the State. We can support that through the film credit. It is supported through the undertaking but it is key to say that the undertaking is about getting producers to undertake something they are already obliged to do. Employment rights cannot be signed away. They are already enshrined in law and exist. I am not sure whether I missed anything there.
Ms Mary Nash:
There is a bit of confusion about the guild. There are the guilds that are predominantly represented by SIPTU so they are the bulk of the guilds and then there are a number of guilds not represented by SIPTU which are the screen writers guild, the directors guild and the screen composers guild. Substantially, when the Deputy talks about SIPTU and the guilds, most of the guilds are represented by SIPTU in negotiations. SIPTU also represents Irish Equity. They are two separate sections of SIPTU.
The difficulty I have with all of that is, first, that they often refer to collective agreements. A collective agreement in an industry has to be between an employer and an employee.
However, the people who get the relief have told us they do not employ anybody and the designated activity company, DAC, employs people. How can somebody who has no employees sign up to a collective agreement? In the case of the guilds, the people who come before the committee representing them tell us they are freelance, although, interestingly, they seem to be the ones who hire and fire people and decide if people work or do not work and are contractors.
A person looking for a job on a project has no protection against somebody stating that person might have worked on the previous project they did but they are not employing that person this time. There is nothing to stop that. We have had testimony at the committee that people are being blacklisted. The individual cases can either be believed or not believed, although they could be checked. It could checked that the people in question have a long record of working in the industry. The testimony they gave to the committee could be checked, as could the fact they have not been back on a film set since they came before the committee in January. That is something that could be verified. Does the Department look at these things, try to verify them and try to establish whether it is true somebody who worked in the industry for 20 or 30 years, or 40 years in the case of a painter who gave testimony previously, has not worked since the body representing him or her came before the committee and said it was questioning employment practices in the industry? The Department could independently verify whether that is true and I do not understand why it does not do that.
The Department could also independently establish whether it is true that film producer companies are going to the Labour Court and the Workplace Relations Commission stating they have no employment relationship with the people in question. In many cases, they refuse to turn up because they have no employment relationship, even though they received money from the State to do film productions on which those people were employed. Would it not be something to check who is telling the truth here? I favour such independent verification rather than saying that is what they told us and we believe them.
Equity states it is being forced to sign contracts that are grossly inferior to the UK Producers Alliance for Cinema and Television, PACT, Equity agreement. They are being asked to sign away their intellectual property rights, which, as they put it, are the most valuable asset of a performer, writer or actor. If they do not agree to do that, they do not get a job. It is as simple as that. They told us they do not get a job. This is in breach of the directive which states that buyout contracts should be the exception, not the rule. Given the level of State investment in this, if the international companies get to benefit from the royalties accruing to that intellectual property, why does the State, which is financing one third of the film, not benefit? Did the State ever even ask where is its return on its investment? If Netflix or Disney is getting a return, has anybody checked where are our royalties? Has anybody checked, for example, if any of the producer companies have offshore subsidiary companies? Could it be they might? Do we know where those royalties are accruing to?
I only want to see a proactive approach to trying to get an independent assessment of some of our worrying concerns, questions and allegations that have been brought in, particularly by Equity and by the Irish Film Workers Association, IFWA, but I also have received testimony in letters, emails etc., to try to establish independently whether they are true. If they are true, it is very worrying.
Ms Mary Nash:
On hiring, the Deputy will be aware of the old system where a person was appointed as the head of department and he became the person who would bring in his friends or people he knew who were good at the job. We are moving away from that. On Screen Ireland, open hiring practices have built year on year, with crew calls becoming commonplace for most productions in 2022. That means that instead of somebody ringing his friends or bringing in people with whom he worked with previously, there is an open call, which means anybody can apply.
Another mitigating factor on the area of blacklisting the Deputy mentioned is the Safety to Create programme the Minister has been rolling out over the past year to year and a half. We ask companies to take a zero tolerance approach to a number of negative behaviours, one of which is victimisation, which is specifically defined as somebody who has raised an issue of being victimised because he or she raised an issue. From now on, we are asking people to sign a code where they will not allow victimisation in a company, a production company or whatever. Going forward, that should improve things.
On the area of the guilds, there is a lot of confusion about the guilds. In the areas of hair or make-up, for example, there would be a guild for hair. That guild would include people who have the skills to be heads of department but also all those down the pecking order of ability and experience. The heads of department might hire and fire people, but increasingly Screen Ireland is encouraging companies to move towards an open call. The people who are not heads of department are represented by SIPTU and they themselves are hired and fired. They are not doing the hiring and firing. Obviously, there are not 2,500 people hiring and firing in the film industry. Most of those may be freelancers but they are still represented by a trade union.
Ms Deirdre Donaghy:
I would make a couple of general points. In my personal opinion, I suppose you do not tend to get 2,500 signing up to join a guild if it is not representing them because people can promptly leave afterwards if the guild is not representing them. In terms of the employments and who has a right to negotiate employments-----
Ms Deirdre Donaghy:
-----the Deputy may need to talk to colleagues in the Department of Enterprise, Trade and Employment who would have the knowledge or expertise in that area.
Certainly, we can see that what has happened in the sector is there are employer representative bodies, which seems primarily to be Screen Producers Ireland, SPI. It has engaged in negotiations with the representative bodies for the different guilds, unions etc., and collective bargaining agreements have been reached. There is a shooting crew agreement, a construction crew agreement. Who are BATU?
Ms Deirdre Donaghy:
They do exist. As I understand it, collective bargaining agreements by their nature are not legally enforceable. They are setting a standard that an industry on both sides - the employer and the employee sides - agrees to adhere to. People are free to negotiate. They are free to go outside that if they want, but this is setting a standard and a baseline for the sector. This is what is agreed.
Certainly, we can see that those agreements have been reached for large parts of the sector and seem to have been well received by the representative bodies included in them. The people who are bound by them on both sides seem to be satisfied with them and with how they are working.
The committee had Irish Equity speak before it. Mr. O'Brien from Equity referred to the US, where they have different rights, and stated that a tough union fought for the rights of performers and that was how they get the rights. That seems to be the nature of how it works: the union negotiates. It is important there is a representative body for anyone in a position where there is not an agreement at present. If Equity wishes to have an agreement, the logical place would seem to be to start negotiations.
Therefore, when it comes to talking about the return to the State, we have done the cost-benefit analysis, which is the things we can track and where we see returns.
When we were before the committee last June, the Deputy read out parts of a letter that had not been sent to us that seemed to be referring to suggestions of values being suppressed and so on. That would be very concerning and is something we would be very concerned about. We asked that it would be sent to us. When the individuals spoke to the committee, we followed it with great interest. That testimony focused on the buyout clauses and the performers' rights. Specifically, Mr. O'Brien and Ms Quinn, representing Irish Equity, both said that they were not saying that anyone was doing anything criminal, illegal or anything like that, and we are not suggesting that impropriety is reflective of the industry. It is very difficult for us to make progress on this because we often have things said to us in very general terms and then we have nothing specific on which to follow up. One of the hearings heard mention of unsafe working conditions and another member spoke of the forums and the avenues by which things like this can be reported. They can be reported on a confidential basis and so on. We can deal with things where there is something specific but it is very difficult for us to deal with or make progress when a very generalised comment is given to us and we can never really grasp a specific thing on which to follow up. If there is an instance where people think values are being suppressed or royalties are being diverted, then by all means, they can report it to Revenue or ourselves. There are avenues to do that.
I thank the witnesses very sincerely for attending. I have listened intently to what they have to say and appreciate their time. At this stage, I do not have any questions but I thank them for being here because it is very important.
I also thank the witnesses. I will ask some questions together. I am concerned about the recently introduced tax credit for gaming. Have there been any applications so far? Is there any difference, apart from the obvious one that one is for movies and the other for games? Do we know the average and median value of each value or claim?
Mr. Ian Kavanagh:
Not at this time, as far as we are aware. The regional uplift was mentioned in the opening statement. The Deputy may be aware it is in its last year of existence. Were we to examine it or advise the Minister on it, he would have to be cognisant of a number of factors. First and foremost, it is an approved state aid so it was notified to the European Commission on the basis that it would be time-bound and tapered. That is very much what is happening now. If we were to depart from that process in any way, it would require a new process of notification to the European Commission. There is another factor that would have to be considered. The Deputy may be aware it is based on a regional aid map. It is designated for areas called assisted regions. It is currently available to an expired regional aid map. Our previous regional aid map covered the period 2014-20. It was used up to 2021 but we have a new map which covers a smaller area of Ireland. There is a reduction of around 15% in the area within which the uplift is available. Were the Minister to consider extending the uplift, that is another factor he would have to consider in that there is a smaller population coverage there. There are a number of factors for the Minister to consider. If we were asked to look at it, of course we would do so, but those are some of the major policy issues that would have to be looked at were we to extend it.
I thank Mr. Kavanagh. Does the number of full-time equivalent, FTE, jobs supported by section 481 include extras? If so, how many additional FTE jobs would be included? Someone may have asked that while I was away. Apologies if they have.
Ms Deirdre Donaghy:
Yes, that did come up. Looking at the cost-benefit analysis, extras are included in the calculation of the FTE equivalent. We could see if we could do an FTE that takes them out. We do not have that now but it is something we could look into to see if it is possible. I would expect that extras are large in number and smaller in time. We could see how that feeds into the numbers. In 2021, the FTEs were 3,265. That was from 21,080 individual separate employments across the course of the year. Of those 21,080 individual employments, about 55% were extras and about 38% were part of the crew. We do not have a figure of how that goes into the FTE because that also takes into account the length of each individual employment. We can see if we have the data to see what difference that would make.
My first question is to Ms Donaghy. I was a minute or two late coming into the meeting so I apologise if Ms Donaghy or anyone else covered this in their opening statement. When he was Minister for Finance, Deputy Donohoe said he recognised there had been certain issues brought forward relating to section 481.
In fairness, Deputy Boyd Barrett has stated them. I will probably restate them in the next few minutes. What is the plan for that engagement?
Ms Deirdre Donaghy:
We have had an ongoing process of engagement. Certainly in the last four years or so there has been quite a lot of ongoing engagement. As part of that, we have met a lot of the representative bodies. We have met IFWA, which has been raising a lot of these issues. We met it a few years ago and we have sent an invitation to meet it again. We have met with Screen Ireland, which is the Government body involved in this, Screen Producers Ireland, Screen Guilds of Ireland, which is the representative of the guilds, and Animation Ireland. We have tried to talk to a broad range of people, as well as colleagues in the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media and our colleagues in Revenue who are responsible for administering the credit on a day-to-day basis. We are due to meet with Equity tomorrow. We will try to get the broadest possible range and we have done that consistently over the last few years. There have been a lot of concrete changes in the sector as a result of that. There have been changes to how the credit operates, splitting it between the cultural test and the employment aspects of it and separating that from the Revenue elements to allow a much earlier engagement in relation to the training. As Ms Nash noted, her Department has totally changed how it will look at the skills development and there have also been a lot of developments in the sector itself that were referred to, like the-----
That is vital. Some of the complaints were specific and some were not.
We will go through the industry. I get it, in that a DAC has to be formed. I get the way films work. It is very difficult for it not to be on a project-by-project basis but there are certain problems created there. We talk about a sustainable industry and worthwhile employment. Beyond that, a fair question was put about what the State can get back. Maybe we should look at that from the point of view that as we are putting in a stake, maybe there has to be something for us. We also have to facilitate what can be done into the future. Ms Donaghy spoke about employment frameworks and all the rest of it. That brings us back to the round-and-round-the-garden question. The producer applies for the grant and gets the money but it is the DAC that is the employer so it is very difficult to actually hold anybody to account if there are particular issues.
Ms Nash spoke about moving away from heads of department, HODs, because it seemed as though it was very simple if somebody made a determination that an employee had been a nuisance and had been bringing up that he or she thought the employer was in breach of whatever. I have heard of instances of it but I obviously cannot prove it. The fact is the HOD makes or does not make the call. We have had numerous people come to us stating that this is ongoing and that there is blackballing, as they would determine it, within the industry. An issue still exists around how many people are actually employed and we do not have any detail on that.
An idea about which I have been told concerns ratios, in that there has been a move away and that the ratios are for fewer experienced workers versus trainees. That is trainees who do not have a huge level of experience. There is an element, we are told, of a race to the bottom. I am just throwing out what has been said to me. If we are talking about a sustainable industry into the future, it does not indicate that we are going to be able to maintain the fabulous productions of the last while if we do not have enough people who have guaranteed good employment to stay in the business and who can actually do it. These are questions that need to be answered. I get that the witnesses are not the police here. I understand that but we have a problem here in the sense that we are told this is happening. We are into "he said, she said". I can see why people would be slow to raise issues that exist because it could have an impact on their employment. We need to find a framework that will allow this to be dealt with. That means not having to bring everything through the framework we have spoken about as regards employment rights.
Equity brought up intellectual property issues and the fact that they were signing away their rights to derivative payments, which they would have been better off having. When we were dealing with the producers, there was an acceptance that we need new collective agreements. That is not something the witnesses can enforce but when we are dealing with these organisations, whether Screen Ireland or some of the many other outfits, it appears there is a certain belief within the industry whereby, to talk specifically about crew, there is no representation for them. Could representation for crew at a board level or whatever be looked at into the future? That could possibly mean these issues could be dealt with at that sort of forum and we could find the means. Obviously the correct stakeholders would then take part in whatever collective agreements are needed. This is all about bringing about something that is sustainable so we are not here making these complaints into the future. A lot of people are afraid to put their heads above the parapet. A number have done that previously and believe they have paid a price for it.
Ms Deirdre Donaghy:
It certainly is a good idea to have these types of avenues for people to raise issues. That has been recognised in the agreements that have been agreed so far. We mentioned the construction crew and shooting crew agreements. When Screen Guilds of Ireland was before the committee, Mr. Eoin Holohan described how they formed the guilds and approached SIPTU, recognising that they needed a new agreement. He stated:
If an industrial relations issue arises on a production, it is dealt with very quickly. A crew member can come to us, and we can go to SIPTU.
It is a new system but he said they believed the system was working. The committee would be far better off talking to the people in the sector rather than me but as far as I know, these agreements have things like dispute resolution practices. They have an agreement on a work-life balance policy. They have avenues within those collective agreements. That seems to be beneficial. To the extent that any element of the sector does not currently have an agreement of that nature, it would seem a good thing that something similar be agreed.
That is it. I believe that is what we all want, to basically have some sort of framework that provides people with safe and sustainable employment. There will always be disputes but there seems to be a huge amount of unease at the minute. Have the witnesses heard about this issue about ratios? We have heard it from numerous people at this stage. It is very easy for someone to say it does not occur. I ask Ms Nash to also deal with the issue as regards HODs. She spoke about moving away from the HOD system, which is an acceptance that there were problems with it.
Ms Mary Nash:
The Deputy talked about the sustainability of the industry. That is important from the point of view of environmental sustainability but also from the perspective of equality and inclusion.
In fact, we had a forum today on that very issue. There probably were 20 different organisations involved. As I said earlier, the open hiring practices have built year on year, with crew calls becoming commonplace. One of the issues with the old system is that minorities and new communities do not have those connections. Placements for people from ethnic minorities or disadvantaged backgrounds have steadily increased, with 2022 having the highest numbers of productions providing those placements. That would suggest that people who are not known or who are without the right connections are getting into the industry.
Supports and accommodation for those with disabilities have increased and are more commonly considered now. Productions in Ireland have more diversity represented on screen. Many companies have put in place policies addressing gender equality. Screen Ireland has gone deep into that area. Some areas have traditionally been male preserves and have been almost notorious for that. For example, the construction, props and lighting departments would have had very few women. That is slowly changing.
In the area of trainees, we would be interested to hear what the Deputy is hearing, because we are hearing the opposite. There was a suggestion that there are many trainees and very few experienced people. The big, international, well-heeled incoming productions do not want trainees. They want experienced people. If there were many trainees on there and if they could not do the job, they would be out the door very quickly. It would not work.
As Ms Donaghy said, there are two good agreements in place, namely, the shooting crew agreement and the construction crew agreement. They include pensions, dispute resolution and even have a work-life balance mechanism built in. I acknowledge there is a gap in respect of actors who are members of Equity. There are two sides there and some agreement is required. It is a problem for the country and for incoming productions if there is no clear agreement. The incoming productions understand how the shooting crew agreement works. It is clear and they can work out how much it costs and how everything works. No new production wants to be approaching each individual and asking what he or she wants and then negotiating. There is a gap in that regard. It would be in our interests and those of the committee to see that gap filled.
I think we all agree on that point. I accept that the ratios sound like a disaster from a long-term point of view but it is something that has been said in numerous instances. If money is going to be paid out, we need a means by which we can make some determination that an overreliance on trainees is not happening. I reiterate there is a requirement for new collective agreements. Beyond that, there is a definite need for representation of crew members within some of the industry organisations. Perhaps this issue can be dealt with at that sort of level and we can get to a better place. Am I out of time?
There is a general agreement - and our guests have far more power in this respect than I have - that we can push this to a particular place to allow for frameworks, forums and relationships.
Perhaps our guests could go into the specifics of the computer gaming credit part of section 481. I worked in Leinster House for a very short time in 2011 and there was a meeting in the audiovisual room at that time. The proposal at that time-----
To be clear, we have not asked our witnesses to come to the meeting to talk about the gaming credit. I am not sure it is fair to expect them to be prepared for that. They are welcome to answer if they choose to do so. I just want to put on the record that we have not asked our guests here to talk about that topic and if they do not have that information to hand, that is fine.
Perhaps it is an unfair question. It would hardly be the only unfair question that has ever been asked at a committee meeting. The idea in 2011 related to a tax break. It was a proposal. Deputy Donohoe, before he was a Minister, brought in a number of computer gaming companies.
The idea at that time was specific and I know we are talking about a different issue. At that time, there were not enough people in the State with significant experience in managing gaming projects. There was a notion that we could take them in from the point of view of ensuring we had the industry and the teams. We are obviously in a different place now as regards digital gaming. I am asking about how the credit works and the notion behind it. Why do we think it is required?
Ms Mary Nash:
It is section 481A of the Taxes Consolidation Act. The Finance Act 2021 provides for the introduction of a tax credit for the digital gaming sector. It is in the form of a corporation tax credit in respect of the costs of developing certain games that is very similar to what is available under section 481. Deputy Patricia Ryan asked if we have had any applications yet and we have not because no expenditure that happened before the regulations were signed could be claimed against. The credit only started last November. The credit available for digital games would be 32% of the lowest eligible expenditure, 80% of totally qualifying expenditure or €25 million. It is subject to a minimum qualifying expenditure requirement of €100,000, which is quite low. The reason for its introduction is that the digital gaming sector has seen exponential growth in the past decade. However, this growth has not been reflected in Ireland's digital gaming industry, partly because people in the industry were going north of the Border where they could benefit from a tax credit. Ireland has the potential to explore the synergy with our established film and animation sectors to support employment in creating digital gaming hubs in the country. It was also included in the audiovisual action plan, which is the Government's action plan for the screen industries. There may not be precise overlaps but as I said in my opening speech, we have a strong visual and special effects sector that has grown exponentially in recent years, and the animation sector. There are similarities there. In concert with the way-----
The gaming credit is interesting and I presume we will return to that topic at some later stage. There are some people in my area of Dublin 1 involved in that sector. There are definitely issues relating to workers in that sector. It contains a young cohort of workers, which is similar to many other creative sectors. I worked very long hours as an architect, perhaps 23 or 24 hours a day. That seems to be rife in the gaming industry. We might end up talking about the gaming credit at another time. However, I am mindful that we did not schedule that as a topic for today's meeting.
I suspect Deputy Boyd Barrett wants to come in for a second round but before he does, I will return to the regional uplift for a moment. I am looking for a little more detail about what the EU defines as "temporary". Are there other jurisdictions that have extended the programme or have a similar scheme? It does not even have to be for section 481 if they have extended it.
I had not noticed that the regional aid map had changed. This time, it specifically includes just transition areas. Our guests mentioned that we have fewer areas on that map now. Are there particular areas our guests could highlight that have been removed from the map?
Mr. Ian Kavanagh:
I do not know what the European Commission's definition of "temporary" is. To be honest, as the Deputy will be aware through the existence of sunset clauses, when we introduce reliefs, they tend to be for a four-year period. When we were developing the uplift, in describing "temporary" to the European Commission, we were conscious we would operate within the parameters of how we usually do things anyway. Essentially-----
Mr. Ian Kavanagh:
Exactly. I do not really know to be honest.
The map the regional uplift is currently based on essentially covers all of Ireland except Cork, Dublin, Wicklow and part of Meath. The major areas that could be said to have lost out this time include a large portion of Kerry which is outside the uplift. If we were to define assisted regions based on the new map, large portions of Kerry, Limerick and Clare would miss out.
Mr. Ian Kavanagh:
There are a number of factors. This was done by our colleagues in the Department of Enterprise, Trade and Employment in conjunction with the European Commission. They used a defined set of parameters in creating the new map which were different from the old ones. They are not available to me but I know it is based on such parameters as population coverage and disposable income in the region and certain measurements of economic development in comparison with other areas. I could provide a list to the committee.
As we are concerned with the interaction of Irish policy with EU recommendations and we discuss that a lot, it would be useful if we could have a look at any of the information the Department has about that, especially that map. It is not a regional map that relates specifically to this sector. It will impact on many other areas. I am sure Deputy Healy-Rae would be interested in the Kerry issue. It would be useful if Mr. Kavanagh could provide it to us.
One of the points performers, writers and artists made to me in my recent discussions with them, was that in referring to intellectual property in 1988, Deputy Tom Kitt made the point that it is a complicated area, but intellectual property is protected in Bunreacht na hÉireann in the same way that private property is. It is people's property. It belongs to them.
There is a problem in requiring people to sign away their rights to that property. The Copyright and Related Rights Act 2000 states the right shall not be waived. The EU directive makes it clear that the EU wants to eliminate that practice and assert it cannot be overridden. Rights to property cannot be overridden. I ask the Department to bear that in mind when the representatives of actors and performers are telling us that if they do not sign those contracts, they do not get a job. Does the Department accept that actors, performers and so on are in a much weaker position than producers? Does the Department recognise that imbalance of power? Someone might be looking for a job and the producer says, "if you want to work on this film, you must sign the contract" which was drawn up by a legal firm and states the person must sign away those things. I ask the Department to seriously look into that and I hope it will recognise that the actor and performer is in a much weaker position in that situation. It is happy days for the people in the powerful position. Of course they are happy with the situation. It is natural they would be. However, the people who might question it are in a vulnerable position. I ask the Department to acknowledge and consider that point.
We have been around the houses many times on the employment matter. I will make one more analogy. In the days when there were many dockers in Dublin docks, when a ship came in - think of it like a film project - someone would stand there and say who could have a job unloading that ship. Those people got their pay at the end of the day if they were picked but they had to come back the next day and there was no guarantee they would be picked to unload the next ship that came in. It was project to project.
The reason we have a trade union movement is that people such as James Connolly and James Larkin said that was not acceptable. It is not acceptable that workers do not know from one day to another or to when the project comes in, whether they have a job. What protection do film crew have against that situation in the project-to-project industry? I put it to the Department that they have absolutely none. They were asked how it works. The head of a department chooses the crew. He might have chosen someone the last time but has no obligation. They stated before the committee that on creative grounds it is different. Each production is different. There is no protection for the person. Would the witnesses think it was odd, if the person who hired and fired them was also their union representative? Would people not have to join that union if they wanted to get a job in a situation where they had no right to work and depended on the say of the head of the department? That is the current situation. I do not see how that can be tallied with quality employment? If that is the situation people face, does the Department not think it needs to be addressed?
How can it be defined as quality employment when the head of department decides each time whether or not a person will be employed and the worker has no right to be re-employed?
Ms Deirdre Donaghy:
I will go through a few of the matters the Deputy referenced. He talked about actors being in a weaker position than a producer. In every sector, a single employee is in a weaker position than the employer and that is why collective bargaining happens. That is why unions are formed as the Deputy said. That is why collective agreements happen. Representative bodies engage in negotiations because the strength of workers is always in their unity. I am getting vaguely Stalinist which is unintentional. The smaller person in a negotiation has power and rights through collective action. If Irish Equity as a union says it will not provide labour until an agreement is reached, that is immense power.
As far as I understand, and as has been said to us, it does not suit the producers that there is no agreement because this continually comes up on every single production when there is an issue about rates, pay and so on. As we have been told and as I believe was said here, they have wished to enter in to discussions with the representative body for Actors Equity and have asked the Workplace Relations Commission to issue to an invitation.
That is how the weaker person gets power in every sector; through collective action and that-----
I have a brief supplementary point. What Ms Donaghy is really saying is that the people who are funding the film producers have no obligation whatsoever to guarantee their rights. Ms Donaghy is saying people must go out to fight for their rights-----
Ms Deirdre Donaghy:
The State provides extensive employment rights and protections, health and safety legislation and every other kind of thing. Extensive protections are provided by the State. There is a myth that an employment is forever. If one is employed on a film, one has a fixed-term contract and knows one has employment until "X" date. If one is employed in what is theoretically a permanent employment, one can be made redundant at any time. The work always has to follow whether work is there.
Our CBA and the opening statement by Ms Nash illustrate that the industry comprises many individual projects. We cannot change that. We have to find a way there is quality within that. The people in the industry say to us that their definition of quality is knowing that, first, there will be another job and they will have another project they can work on and, second, they have a process to see that their career will progress through the different levels. An awful lot of work has been done by the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media and Screen Ireland, in the context of how the industry works, to try to provide quality employment and ways of tracking quality employment within the reality of how the sector exists.
Ms Mary Nash:
I was just looking at one of my graphs. In 2022, open hiring practice was in operation on 78% of productions. Screen Ireland's training acknowledges some challenges with regard to the lack of knowledge on how production companies can approach and support under-represented outreach communities. It acknowledges the sector needs to promote the industry as a wholly inclusive career workplace. These points are addressing the intermittent nature of employment. With regard to the outreach areas, community perception can often see that the sector is a closed shop and the who-you-know approach is the only access point.
These things are recognised by screen training sectors. Part of the discussion this morning was about how we get past the who-you-know approach and make the industry a totally inclusive and diverse industry. Continuously run unconscious-bias training and diversity-inclusion training were also mentioned. All of these will, it is hoped, address the issues whereby people feel they are excluded from the industry for one reason or another.
The issues that have been brought forward obviously relate to Equity. There is agreement across the board that there is a need for a better agreement that would protect the intellectual property and long-term payments for actors. That would obviously allow for a greater level of sustainability. It is about bringing that about. Numerous people have come to us and spoken about the issue with regard to ratios and blackballing. I accept that might not happen on every production but I hear that it happens on a considerable number of them. That causes worry with regard to the future sustainability of the industry. It needs to be addressed. We need some sort of framework to allow these matters to be dealt with.
We talk about the Department of Finance being the paymasters I accept that the Department cannot police all of this. However, we need to find the means by which it can look in to it and be part of the responsibility with regard to ensuring we have a better framework. We will obviously need collective agreements and whatever else but it is not a case of somebody making a determination that somebody else is a nuisance because he or she may have wished to have their rights to be sorted out and decides not to phone that person again. We cannot have that.
It is very difficult because we do not have the numbers or the exact figures. That is probably something else that needs to be addressed. I am putting that responsibility on the witnesses and ask that they report back within a week-----
This will be pretty much the last session we will do on section 481 and then we will go in to report-writing stage. Is there anything the witnesses wish to add to the information we have had today?