The German government has agreed a tax rebate model for the film industry following on the lines of the new UK scheme to come into effect from January 1, 2007.

In collaboration with a working group of experts from the film industry, State Minister for Culture Bernd Neumann had been considering options for a new financing incentive to replace the old style private media funds which had been abolished last November.

A deadline of July 1 had been set for an announcement and Neumann was able to unveil the result of his deliberations after the Angela Merkel administration passed its budget for 2007 in the Bundestag on Wednesday (July 5).

The programme entitled "Incentive for strengthening film production in Germany" will see $76m (Euros 60m) being provided annually, from 2007 to the end of the current administration's term of office, for a new film financing model enabling producers of cinema feature films to receive a rebate of between 15%-20% of the production costs incurred in Germany.

Commenting on the incentive, Neumann regarded it as "a great success that, together with the film industry and the support of the Federal Finance Minister, we have arrived so swiftly at a convincing concept" and suggested that this model would create "conditions which are internationally competitive for the German film industry and comparable with other EU states.

"The model will result in fast and immediate effects for German producers and studios," Neumann added. "Furthermore, Germany will also become more attractive as a production location for large international productions. In this way, additional jobs can be created and economic effects achieved which are many times bigger than the sum made available in the budget."

Neumann has now charged his working group of experts to draft the specific guidelines for the new incentive model as soon as possible since a change will have to be made by the Finance Ministry to the Income Tax Code for the scheme to become operative from 2007.

Speaking exclusively to ScreenDaily, Egoli Tossell Film's Jens Meurer, who was one of the experts on Neumann's working group as a representative of the Group of Independent Producers, described the proposed model as "a huge push for the German film industry internationally and a clear sign that the German government is strongly supporting film. At a time when the UK is withdrawing somewhat from international/European co-financing and production of (bigger) films, Germany is moving in to re-assert ourselves.

"We are the most co-production friendly and flexible European market - and there is plenty of additional money to bring to the table (i.e. funds, TV, distribution)," Meurer observed.

"This measure has been designed to be co-production friendly and compatible. I believe that before long it will also facilitate new forms of private equity in German-(co-produced) films. There's lots of money around. And it won't be silly in the future."

Meanwhile, Sytze van der Laan, CEO of Studio Hamburg Produktion, told Screen Daily that the initiative was "the first step in the right direction... but it is just only a first step." He suggested that there were other key issues waiting to be resolved such as the Media Decree's negative effect on co-productions and the withholding tax for foreign actors.

As it stands at the moment, the Media Decree makes it impossible for foreign producers to co-produce with Germany.

While German producers participating in international co-productions run the risk that their production expenses will be allocated for tax purposes to a foreign permanent establishment (i.e. the non-German co-producer), co-producers from outside of Germany participating in a co-production with a German fund or production company would be required to establish a German permanent establishment and be subject to German taxation.

Van der Laan, who produced one of the few German-Canadian co-productions - The Conclave - last year, argued that, "in a united Europe looking to the world market , there must be practical regulations for this economically and artistically important collobaration between producers of different nations."

Moreover, he called for changes to "the compulsory taxation of foreign artists who have to first pay 25% here in Germany and then get it back with difficulty a year later", explaining that this was the reason why his company had received "rejections from well-known people who don't like the idea of waiting for their money.

"What's the use of savings on the production side if the artists don't follow," he asked.

"There is still urgent need for action on these points," van der Laan stressed. "We will therefore continue talks with the politicians and the various interest groups."

While Neumann had been concentrating his efforts in the past six months on exploring the options for new tax incentive schemes, he has never left anyone in doubt in the past of his appeciation of German producers' frustration concerning the Media Decree.

Last summer , Neumann had declared: "We must change this, we will change this and we want to change this" and had followed this shortly before the Bundestag election at the Medienwoche Berlin-Brandenburg by saying that he would change the regulations "with the stroke of a pen" if his party came to power.

However, industry figures have told ScreenDaily in the past that such an action is not in Neumann's area of responsibility and would be decided rather by the Finance Ministers of the Laender and the Federal Finance Minister.

In a first reaction to Neumann's proposed incentive, Robert Strasser, chairman of the private media funds' interest group BPFM, told Screen Daily that his organisation "generally welcomes" the film financing initiative which would "contribute to the strengthening of the German film industry and film location."

However, Strasser argued that it was "a shame that - unlike in Great Britain- one has restricted the funds per year to Euros 60m.

"In actual fact, these are only 60m additional film subsidy - no more and no less - and they also have to be shared by the Germans with foreign productions in Germany. We hope that, as confirmed in the Coalition Agreement, the Federal Government will continue working at the realisation of its promise to provide the German cinema with access to private capital.

"Such an impulse model could trigger an annual influx of Euros 200m-plus worth of private capital and create a genuine international competitiveness for the German cinema."