Romania Approves Huge Film Industry Tax Breaks to Boost Economy

INCHEON, SOUTH KOREA - APRIL 25: Cameramen look at the monitors on the set of a South Korean TV drama 'Gahwamansasung' or Bong's Happy Restaurant by MBC (Munhwa Broadcasting Corp.) on April 25, 2016 in Incheon, South Korea. The South Korean TV dramas, also known as soap operas, are popular …
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Romania has passed massive tax cuts to entice movie producers after neighboring Czech Republic and Hungary showed how lucrative such tax incentives can be for the national economy.

Despite initial resistance, the Romanian socialists in power finally caved to evidence-based pressures from local Romanian municipalities to grant tax breaks to the film industry. The new measures, passed last week, will offer 35 percent rebates for films shot in Romania, provided the film crew spends at least 100,000 euros in the country.

Romania has further incentivized filming by offering an additional 10 percent rebate to any film project that explicitly promotes Romania and spends at least 20 percent of its budget in the country.

Last November, some 1,500 Romanian officials signed a petition pushing for the incentives after the Social-Democrat Party rejected a previous version of the Film Law.

A 2015 report by PwC Romania estimated that the incentives could boost the number of foreign films produced in Romania by up to seven times, increasing the “total aggregated economic impact” to 1.4 billion euros. The report also projected that the 35 million euro value of the rebates would generate up to 140 million euros in increased revenue.

Such tax breaks have worked very well in other central and eastern European nations.

Hungary currently offers a 25 percent rebate for qualifying films, to which OrienTax attributes the recent “rapid growth of the Hungarian film industry.”

The Czech Republic’s 20 percent rebate on qualifying money spent in the country has attracted the likes of Tom Cruise’s Mission Impossible: Ghost Protocol and the BBC’s The Musketeers.

The robust tax rebate systems that Hungary and the Czech Republic have in place have earned both of the countries coveted spots on entertainment finance websites’ lists for the best locations in which to film movies.

Economic incentives have also proven successful at the national level, demonstrating that tax cuts in the movie industry generally improve the local economy.

In 2015, California began a five-year program offering film studios $330 million annually in tax incentives. In its first year alone, the tax cuts produced $1.5 billion in revenues from direct in-state spending.

So impressive was the program’s success that the California Senate voted unanimously to extend the deal another five years, until 2025.

Romania’s new rebate program, which could be rolled out as early as July, is almost certain to increase foreign spending within the country as similar programs have elsewhere and will provide a much-needed economic boost for the languishing southeastern European nation.

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