Ireland's joint parliamentary committee on finance has issued a report strongly in favour of the continuation of government support for the film industry.

"The Joint Committee believes that for strong economic and cultural reasons the government should continue to promote and foster film as a high value, high knowledge, highly skilled industry."

The Committee added that the government should retain a tightened Section 481 - or introduce a new measure of similar benefit to film production - while reducing the cost to the exchequer.

The issue of tightening Section 481 regulations has already been partially met by new guidelines for the scheme which come into effect on January 1.

Complicating matters, however, is the issue of the historical abuse of the tax-support scheme.

In an unpublished letter to the committee, seen by, the Irish taxation authority raised its estimate of the total value of suspected 'non-compliant' tax relief already awarded from Euros 17m to Euros 23.3m.

The letter also revealed that the Revenue Commission is actively involved in a legal case concerning allegedly non-compliant tax relief that is currently being heard 'in camera' in the Irish courts.

Responding to this news the Committee took an aggressive stance, refusing to let the Revenue shift the blame for non-compliant activity - and questioned the efficacy with which the Revenue had policed the scheme.

"The Joint Committee has been informed and fully accepts that there has been some abuse of section 481. We have been informed that the loss to the Exchequer is in the order of Euros 23.3m out of the total cost to the Exchequer of Euros 265m for film relief over the last 10 years. This is to be deplored and the Revenue Commissioners must now recover all taxes due to the Exchequer as a result of the abuse of the section 481 scheme."

At a briefing on Thursday (Nov 13) to announce his spending estimates for 2004, the minister for Arts, Sport and Tourism, John O'Donoghue gave his response to the Committee's statements to "I see what they're saying but my own view, to be honest, while I agree with increasing the cap [on investment] I think we'd need a longer period than the four years to 2007."

The minister added that the future of Section 481 would be revealed by the minister for Finance when he delivers his budget speech on December 3.