Giving Amazon a break

Amazon Prime’s announcement of a Lord of the Rings TV series to be made here was big news in the media - as was the huge tax break it is likely to get. It’s part of a business model that means Amazon paid no tax on $18 billion profits in the US last year - but those in the background of their TV productions don't share the wealth. 

When Amazon Prime finally announced last week the Lord of the Rings will be filmed in Auckland, the jobs bonanza for cast crew, carpenters and caterers was a major focus in media reports here.

But so was the probable payback for the makers under the incentive scheme to lure international productions here. 

“If Amazon applies for a screen production grant, it could get 20 percent to 25 percent of its New Zealand spending back. That could be a subsidy of between $300m and $375m for the world’s richest man,” Newshub reported. 

Newshub was guessing that the payback would be north of $300m. Guesstimates about the likely budget have ranged from $1 billion to $3 billion - and of course the rebates won't end up directly in the pocket of Amazon’s billionaire owner Jeff Bezos. 

"I think all of us at some level begrudge the subsidies the film industry has around the world," trade minister David Parker told Newshub.

Not without reason.

Number-crunching by Herald investigations reporter Matt Nippert earlier this year revealed at least $600 million had been paid out to Hollywood producers since 2010 already under the SPG scheme. 

This month it emerged that parent company Amazon paid no tax at all on profits of $18 billion in the US this year. 

Amazon will pay $0 in taxes on $11,200,000,000 in profit for 2018 https://t.co/6I5YSRWG9Y via @YahooFinance

— Sandy (@lifeisgoodform) September 18, 2019

It was the same story in 2018 too - when Amazon actually got a tax rebate of US$129 million. 

Newshub also said a report for the Ministry of Business Innovation and Employment last year found the economic benefits of the grant "significantly outweigh the costs."

But the same ministry - along with Treasury - also concluded there should be upper limits to curb surging taxpayer support for the sector, said the Herald.

In January, The New Zealand Herald revealed the government decided not to place any upper limit on the rebates paid out under the SPG three weeks after David Parker and PM Jacinda Ardern met with Sir Peter Jackson. 

The Herald has reported that a report for the government released in June concluded “the film industry was now reliant on subsidies  - and it was unable to conclude if the SPG was delivering taxpayers value for money.”

And this week the Herald’s business editor Liam Dann asked If other industries should be considered for such breaks. 

He even suggested banks could benefit by the same logic. 

“Thousands of highly lucrative local jobs have disappeared in the past decade as the big global firms have pulled back to Australia. Offering tax breaks to massively profitable investment banks might seem politically unpalatable - until you remember we're all happily giving one to the world's richest man,” Liam Dann wrote.

On RNZ’s The Panel last Monday, New Zealand Institute economist Eric Crampton cited the work of an "old grad school buddy in the US” who studied how the US states offer breaks to filmmakers. 

John Charles Bradbury's study (PDF) found Georgia offers the most generous tax credit of up to 30 percent of expenditures for film and video production within the state, but "resources devoted to the tax credits may have superior alternative uses.”

“US$800 million in tax credits approved in 2018 represents a cost of 3 percent of Georgia’s state-funded budget - or $220 per Georgia household,” he concluded.

In the US they’ve certainly noticed that New Zealand offers big tax breaks for film and TV too. 

USA Today and other papers  - via the AP agency - reported the NZ Taxpayers Union complaining every New Zealand household could end up paying more than $100 each  - and ACT leader David Seymour’s objection to “lining the pockets of the world’s richest man”. 

And it turns out Amazon Prime in the US doesn’t line the pockets much of those who fill the minor roles - even in Georgia.  

Under the headline: Love ‘Lord of the Rings’? Audition for these Amazon Gigs industry website backstage.com said it was too soon for casting opportunities in the upcoming LOTR production  - but Amazon Prime productions in the US were looking for talent. 

The one at the top of the list was in the state of Georgia: 

“The new Amazon Studios series “The Underground Railroad” -  directed by Academy-award winner Barry Jenkins - is seeking black male talent, aged 9–11, to play a house boy. Shooting will take place in Savannah, Georgia . Talent will be paid $100 for eight hours. Apply Here!. 

The Underground Railroad is a story about slaves who made a bid for freedom from their plantations in Georgia in the 18th century. It doesn’t seem a good look to pay a pittance to African-American talent in the 21st century, especially when the state offers big breaks.

But it’s not only Amazon. Backstage.com also offers this opportunity:

The NBC primetime drama series “Chicago Fire” is seeking background actors. Real police, paramedics, and firefighters, aged 18 and older, Filming will take place on specific days between Sept. 23–26 in Chicago, Illinois. Pay starts at $104 for eight hours of work. Apply here! 

A prime time show that fakes firefighting is not willing to pay an awful lot to real firefighters to add the required authenticity.

These rates are typical in the US for non-union acting talent even from the biggest networks, studio and producers. The minimum wages in most states applies, even in those such as Georgia where the incentives for the producers are generous.

“Aucklanders will be sizing up their anatomical suitability as elves, dwarves, orcs and humans, for work as extras,” said Liam Dann in the Herald last weekend.

Back in July Stuff reported a local agency had appealed for “Middle Earth soldiers, villagers and villains” though no more details  were forthcoming ahead of the official announcement from Amazon Prime.

When The Hobbit movies were made here there was a major controversy about workers’ conditions. The law was changed in 2010 to give the movie-makers more flexibility and no collective bargaining for film workers. 

The current government has changed the law, and actor Robyn Malcolm - who pushed hard for that - told RNZ’s Morning Report earlier this month things should be better on the upcoming Amazon Prime production for film workers and actors. 

Let’s hope New Zealanders making up the cast of thousands  - and also chipping in with tax breaks - also get a break from Amazon, a company that’s made a masterpiece out of tax minimisation.