Freitag, März 10, 2006

Score one for the tax man...

is too good not to share.

Seems that there is a German film fund, a closed fund that finances films. In order to take advantage of tax laws, they (claim to) do so as producers of the film, i.e. they are part and parcel of the act of making the film, not mere financers of said film.

That way investors can take losses off their taxes, since they are part and parcel of the production process. You do a simple income-expenses calculation and you've got a nice negative cash flow while a film is being made, before it heads out to the market. If the film makes money, you pay taxes on the income. As we all know, film accounting rarely shows real profits (but it can happen: similiar funds financed Terminator 3 and made a killing for their clients).

Now these folks financed a little film called LA Crash.

Which of course won three oscars.

Apparently tax people in Germany watch TV too. They also noticed that the company in question - remember, they are claiming to be the producers of this film - aren't listed anywhere as actually being the producers of this film.

Which means that they are financing the film and that the income generated cannot be deducted from taxes.

Which means that the company mentioned in the link is apparently going to go up on charges of fraud, and that all of the investors will be getting a friendly letter from their local tax authorities "correcting" the income tax statements of the appropriate years and maybe even a little charge of ... tax evasion.

Fraud because they claimed to be producers when they weren't, tax evasion because they took tax breaks they weren't entitled to.

There is a term in the movie industry called " stupid German money", which Edward Jay Epstein does a great job describing not only here, but here as well.

Guess these Germans will find out how stupid they've actually been...

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