Jurisdictions Bidding for a Film Shoot With Public Money
Jurisdictions offer transferable or refundable credits covering a share of production spending, and productions locate accordingly. The competition is real, the jobs are temporary, and the studies disagree about whether it works.
How the Incentives Work
A jurisdiction offers a credit covering a percentage of qualifying production expenditure incurred locally, commonly in the range of twenty to forty percent, sometimes with additional percentages for filming in specific regions or hiring local residents.
Because most production companies are special purpose entities with no local tax liability, a credit against tax would be worthless. Programmes therefore make the credit refundable, paid in cash, or transferable, sellable to a local taxpayer that does have liability.
Transferable credits trade at a discount to face value, and the discount is the transaction cost of converting a credit into cash.
| Credit Type | How the Producer Realises It |
|---|---|
| Refundable | Paid in cash by the jurisdiction |
| Transferable | Sold to a local taxpayer at a discount |
| Non refundable, non transferable | Nearly worthless to a production entity |
A market exists in which local businesses buy film credits to reduce their own tax bills, at a discount that becomes the effective cost of the programme to the production and the effective revenue loss to the state.
Why They Spread
The mechanism is a straightforward bidding competition.
Film production is mobile. A script set in one city can be shot in another, and the decision is driven substantially by cost.
Once one jurisdiction offers a meaningful incentive, productions move. Others respond to recapture the activity, and the equilibrium is that most jurisdictions offer something and the relative advantage of any one is small.
That is a classic competitive dynamic, and it means the aggregate effect across jurisdictions is largely to transfer public money to productions rather than to increase total production.
What the Evaluations Found
Independent analyses have been conducted by legislative auditors and academic researchers across many jurisdictions, and the findings are consistent enough to state plainly.
Most studies find that the tax revenue generated by the incremental economic activity is less than the cost of the credit, frequently substantially. Return figures commonly cited fall well below one dollar of revenue per dollar of credit.
The reasons recur. A substantial share of the highest paid crew and cast travel with the production rather than being hired locally, so wages leave the jurisdiction. Equipment is frequently rented from specialist suppliers elsewhere. And the employment created is temporary, ending when the production wraps.
Studies commissioned by industry bodies generally report more favourable results, and the divergence traces principally to whether indirect and induced effects are counted and to what multiplier is applied.
The Argument That Survives
The defence that holds up best is not about tax revenue.
Where a jurisdiction sustains incentives long enough, a genuine industry cluster can form: sound stages, equipment rental, post production, and a resident crew base with the skills to staff productions.
Once that exists, productions locate there partly for capability rather than only for the credit, which is a durable economic asset rather than a temporary transfer.
Several jurisdictions have achieved this, principally by combining incentives with infrastructure investment and sustained commitment over many years.
The implication is uncomfortable for programme design. Achieving the cluster requires paying above the return for a long period, and jurisdictions that offer incentives intermittently pay the cost and never build the asset.
The Programme Design Failures
Several recurring weaknesses have been identified by auditors.
Uncapped programmes create unlimited liability. Several jurisdictions found the annual cost far exceeding projections and imposed caps retroactively, which damaged credibility with productions.
Weak residency requirements allow spending on imported labour to qualify, which removes the local employment rationale.
Above the line inclusion, meaning covering star and director compensation, transfers a large share of the credit to people who do not live in the jurisdiction. Several programmes cap qualifying compensation per individual for this reason.
Verification. Credits are calculated from claimed expenditure, and fraud cases involving inflated or fabricated spending have occurred in several programmes, producing criminal prosecutions.
The Political Durability
The interesting question is why programmes persist given the evaluations.
The benefits are visible and concentrated: a production filming locally, recognisable people in town, and a specific number of jobs that can be counted. The costs are diffuse and appear in a tax expenditure report nobody reads.
That asymmetry is the same one that sustains many targeted incentives, and it is a better explanation of the persistence than any disagreement about the economics.
The Bottom Line
Film incentives reliably move production between jurisdictions and, according to most independent evaluation, do not return their cost in tax revenue. The defensible objective is building a durable industry cluster, which requires sustained commitment through years of negative return and which a handful of places have achieved. The design failures are consistent and fixable, principally capping the programme, requiring genuine local hiring, and excluding compensation paid to people who leave when the shoot ends.