The Czech government has rejected a proposal to create a tax rebate for filmmaking, saying such an incentive would create special, beneficial tax conditions to a single industry.

The proposal would have offered a 20% tax rebate on producers' Czech spend and would have allowed the government to specify what costs would be covered.

Ludmila Claussova, director of the Czech Film Commission, was disappointed by the news, pointing out that the Czech Republic was at a disadvantage to other countries such as Hungary and Germany that have successful incentive programs.

The news is especially bad for local service providers, who have still not recovered from last year's Hollywood writers strike and the continuing fall of the dollar. Prague is currently hosting Paramount's G.I. Joe, and production on HandMade Films' Eloise In Paris should start later this year, but otherwise the city's stages are quiet.

'The lack of a government initiative at this stage of the cycle will result in the almost total decimation of the foreign film production industry in the Czech Republic,' said Matthew Stillman, managing director of Prague-based Stillking Films, which recently serviced Wanted, Casino Royale and The Chronicles Of Narnia: Prince Caspian.

In an interview with the Czech Business Weekly, Stillman said the government's decision will 'continue the drain of Czech talent to the countries securing the investment, as well as the loss of several thousand jobs and the disinvestment of other technical support companies that moved into the Czech Republic to support what was-in the 1990s and early years of the 2000s-the market- leading country.'

Separately, local production is flourishing, thanks to increases in state subsidies. In May, more than 50 Czech films were ready for release, in post-production or production. The Czech box office was one of the few in Europe that saw growth in 2007. Czech admissions last year were at 12.8m, a growth of 11.4% on the previous year, according to the European Audiovisual Observatory.