The Gerhard Schroeder SPD-Green coalition administration has dashed any hopes for the introduction of tax incentives into Germany, similar to those in place in the UK and Canada.
The move came in a response to a parliamentary question on the film industry tabled by the CDU and CSU opposition parties.
In its series of questions, the CDU and CSU asked if the Federal Government was planning changes to the existing Media Decree "to enable an attractive participation by media funds in German productions" or whether it intended to follow the lead of many other countries by creating tax incentive programmes.
In response, the Schroeder administration argued that "the creation of special tax cases and exemptions" would "not be a suitable modus of film funding. This would be in contradiction to [the government's] goal of abolishing subsidies and tax exemptions."
It stressed that there were "no intentions to introduce tax support or incentives for film productions alongside direct [public] film funding", arguing that "the tax parameters are already now so favourable that media funds invest billions in the area of film and television production."
Instead, the government argued that it was important to make investment in German films and at German centres of production "more attractive."
The government said that it was holding discussions with the media funds' interest group Verband deutscher Medienfonds (VDM) about its members voluntarily agreeing to spend at least a part of their fund investments in Germany.
The government added that it was "also exploring other incentives to make investments by German media funds in Germany more attractive. These are also proposals from the film industry to raise the competitiveness of German studios and production centres through subsidies on wage costs for productions in Germany."
This latest development comes after the economist and management consultant Michael Paul had unveiled a study commissioned by the producer pressure group film20 (ScreenDaily.com July 2003) suggesting that the introduction of tax incentives similar to the UK's sale and leaseback model or the Canadian tax credits system could result in a doubling of production expenditure in Germany in the next five to seven years.
"Film production in Germany is at a turning point", Paul's study concluded at the time. "Either we succeed in becoming competitive again on international productions...Or Germany will lose even more ground in the international competition for 'runaway productions'."