Are you a member of the Taiwan government interested in economic growth or the cultural industry? If so, this article is for you!
Let's leave Taiwan for a moment and imagine you're a producer for a mid-budget Hollywood production in need of Asian talent and locations. Maybe you're hoping to distribute to the massive Chinese market, or perhaps you're striving for visual and historical accuracy. Most likely your friends and colleagues told you about generous 30-50% tax credits and rebates in Asian countries like Malaysia, Philippines, Singapore, and South Korea. Maybe you first question is "when can we start shooting?"
But before you make that decision, maybe someone else tells you to consider Taiwan. It has a respectable local film industry. It provides nearly identical cultural and linguist similarities to China. And eager government officials claim that it provides a competitive incentive program, oft-citing a recent $1M credit awarded to Martin Scorcese's Silence as evidence that Taiwan is open for business. Perhaps at first glance, it sound like the isle of Formosa is the ideal locale for your production.
No so fast.
In its 17 years of experience, Cameron Thomson has helped establish world-class film studios, grow movie & audio technology businesses, and finance and produce film & TV productions. Right now, we're helping to build Huallywood Film Studios in Hualien, Taiwan, where Cameron Thomson president Ron Thomson serves as CEO. With pioneering investment from Taiwan Land Development Corporation (TLDC), and an established international ecosystem of industry players, including post-production specialists, distributors, merchandisers, and more, Huallywood is the ready pipeline through which a deluge of Western films and TV series targeting the Asian market will arrive in Taiwan and spend their multi-million dollar budgets.
But here's the problem: when you do your research, Taiwan is not a competitor for this business. It's not even on the map. And its current incentive programs are so restrictive, paltry, and bureaucratic, that if Hollywood producers even took the time to decipher the labyrinthine application processes, most of them would still end up cutting their losses and hopping across the sea to Seoul or Manila.
Which is a shame.
Cameron Thomson has committed three years of investment in Taiwan for good reason. Private local businesses such as TLDC are injecting significant resources into advanced production facilities and equipment, and the local talent and filmmakers have impressed us with their creative energy and readiness for employment. But most of all, the evolving entertainment industry and China's overwhelming demand for sophisticated content has teed up Taiwan to host a mega-revenue generating film & TV ecosystem.
How much revenue?
Cameron Thomson has projected USD $250M per year in total production budgets spent through Huallywood Film Studios in Taiwan. In order to drive this revenue, Cameron Thomson, in conjunction with TLDC, has committed to a USD $25M private fund to attract over 40 pre-financed and distribution-ready film & TV productions to Taiwan.
We have the facilities and the private investment. We have the ecosystem of international film studios, productions, and distributors. What we lack, after 3 years of searching, is a willing government partner ready to implement a national incentive program that competes on a global level.
So let's change perspectives. You're no longer a Hollywood producer. You're now a member of Taiwan's government. You'll understand that competitiveness equals a higher economic growth rate. You might see that the cultural industry offers wealth generation opportunities and employment for women, youth, and minority communities such as Hualien (the location of Huallywood Film Studios), which hosts the largest aboriginal population of any city in Taiwan. But you also have unique political pressures to contend with, such as populist concerns regarding investment of capital in foreign-led projects.
How do you do this deal? How do you prevent the USD $250M pipeline from redirecting south or north or anywhere but Taiwan? Here are three methods which Cameron Thomson has used time and again with success.
Sell the numbers
If you as a taxpayer heard $1M of your government's tax revenue was given to a Hollywood production, you might get flustered. And often, the nuances between tax credits and tax rebates are not easily communicated to the public in convenient soundbites. What does make sense, however, is that Malaysia, South Korea, and Singapore have created hundred-million dollar cultural industries by investing in film & TV projects.
Take Malaysia for example. According to Oxford Economics, in 2013, Malaysia's filmed entertainment industry directly contributed USD $659M to the economy, supported 10,994 jobs, and generated USD $83M in tax revenue. Taking into account the 'multiplier' effect of indirect economic and employment benefit, Malaysia grossed USD $161M in tax revenue and supported 59,800 jobs, largely the result of a 30% tax rebate with no cap that attracts international productions. And while Malaysia is still a small player in the entertainment industry, the nation's proactive policies motivated the establishment of the USD $120M Pinewood Iksander Studios, which will further accelerate this growth.
Now let's compare Malaysia's success to what Taiwan is currently doing. The Ministry of Culture's Bureau for Audiovisual and Music Industry Development offers a tax credit of 30% capped at USD $1M for foreign productions, and this is subject to complex labour and location restrictions. The city of Taipei offers a similar incentive capped at USD $1M. Let's do the math on this. For a mid-budget Hollywood production of USD $60M, Taiwan's current incentive program is calculated liberally to within the 0.5-3% range!
Further compare Taiwan to its neighbours such as Singapore, Philippines, and South Korea -- which all have similar policies to Malaysia -- and it's clear that Taiwan isn't even in the game.
Expanding globally, Taiwan's 0.5-3% incentive has to compete with 20-50% incentives offered by federal and provincial governments in Australia, New Zealand, Fiji, South Africa, United Kingdom, Austria, Belgium, France, Germany, Iceland, and Italy, just to name a few. There are over 100 jurisdictions on the planet offering a level of incentive significantly higher than Taiwan.
Why? Because in every single jurisdiction, this investment creates a revenue multiplier effect, and employment and productivity levels excel higher than the respective national averages.
Sell the numbers. Everyone understands that to make money, you have to spend a little. And if that's not enough, here's the hook: the tax break is only awarded once the production budget has been spent and audited, making this a very conservative investment in an opportunity that wouldn't otherwise exist.
Replicate what works
The reasons for implementing a national film & TV incentive program are clear. What isn't clear is how to do it at a world-class standard. And if there is significant public and internal scrutiny into such a program, the threshold for missteps and over-spends is non-existent.
So once the Taiwan government decides to grow the cultural sector, it should rely upon industry experts who designed similar incentives for foreign governments. This is exactly what Cameron Thomson does. Most notably, we helped build a national tax credit and business model which reinvented the United Kingdom's industrial heartland as a mecca for TV & film production. This initiative attracted hundreds of millions of pounds into a stagnant economy, and renewed the UK's competitiveness in the film industry.
This success was similarly accomplished in Canada, where Cameron Thomson VP of Entertainment David Plant served as Head of the Toronto Film Commission. Under his leadership, Canada's largest city converted disused docklands into 'Hollywood North', using a combination of 20-40% tax credits to lure big-budgets productions from California. Today, this enlightened public policy is evidenced by some of the United States' most iconic, current television serials, which are in fact produced in Toronto. But the unseen benefits are the most exciting. Over the last ten years, the film & TV industry has emerged as a key employer of young people, and generated an economic multiplier effect throughout the country.
Replicate what works. If Taiwan's goal is to attract a pipeline of Western productions with large budgets, then experts should be relied upon to guide the cost-effective and risk-free establishment of this incentive program.
The public-private partnership model
A major trend throughout the Western world's cultural, scientific, medical, and basic infrastructure industries are Public-Private Partnerships. The PPP model merges the best of private industry -- efficiency, focus, and sustainability -- with the government's need to ensure public benefit and prudent exercise of funds. This model has been used to spur some of the most rewarding and inspiring developments, such as green energy, quantum technology, and, of course, the enhanced sharing of increasingly sophisticated cultural content.
At Cameron Thomson, we often say "crawl, walk, run." While matching contributions to Huallywood's USD $25M Film Fund would be a true investment in jobs and economic growth, a film & TV incentive program is a good first step to building this highly-effective partnership model.
And it's important to note that this model is now the West's flagship method of public investment -- so much so that governments often solicit partners for projects. Taiwan is in the unique and incredibly fortunate position to have Taiwan Land Development Corporation leading the way with Huallywood Film Studios. The facility is a world-class production centre and ecosystem that offers Taiwan a ready-to-go opportunity to capitalize upon the West's investment in the Chinese world's exploding demand for filmed entertainment.
So these are three ways that Taiwan can setup a competitive film & TV incentive program. The infrastructure and private investment exist. All that is needed is the government will to support this industry, and create these jobs.