Originally posted at my friend Usman Ghafoor’s blog. Found it to be an interesting read so sharing it with you all.
An “adjustable withholding tax,” proposed in the recently announced federal budget for the fiscal year 2013-14, is threatening to push the cinema industry back into a period of no business activity
It may be back-to-square-one for the people associated with Pakistan’s nascent cinema industry that had only just begun to recover from a decades-old phase of depression. An “adjustable withholding tax,” proposed in the recently announced federal budget for the fiscal year 2013-14, is threatening to push the industry back into a period of no business activity.
The said tax, to be levied on the import of all foreign films and TV shows — Rs 1 million on a full-length feature and Rs 0.1m per episode on a foreign-produced drama serial — comes at a time when the revival of the cinema industry seemed after all a possibility. The rise of posh multiplexes, a recent phenomenon in Pakistan, which has given an obvious fillip to our (dying) cinema-going culture and also led many individuals as well as companies to start investing in future screens, has been due primarily to the theatrical release of mainstream Bollywood movies that enjoy a wide viewership on this side of the border. If imposed, the tax could change things for worse.
Leading film distributor and owner of the hugely successful, three-screen Atrium Cineplex, besides the olden Nishat, in Karachi, Nadeem Mandviwala sees it as an “advance tax” which shall toll the death knell for the industry. “It will bring the import of Bollywood and Hollywood movies down by 50 per cent and 70 per cent respectively,” he says, clearly perturbed.
“So, what will you play in your cinemas? In the past two and a half years, only six Pakistani films were exhibited. Out of these, barely two recovered their cost. How can you run the show in this situation?
“A tax shouldn’t be meant to bring a business to a close,” he adds. “How will the government tax us when we won’t be doing any business?
“Our [cinema] industry suffered losses for well over 40 years. It wasn’t until 2007 when the import of Bollywood movies was started that we finally saw people flocking to theatres.”
Nadeem Mandviwala.
Mandviwala, who was eagerly looking forward to the launch of his first state-of-the-art multiplex at Islamabad’s Centaurus this season, says the tax will throw the potential investor out the window.
However, he declares, the ticket rates shall not be affected in any way, since “this isn’t a tax on cinemas; it mainly targets the importer. And, because it will result in lesser import [of foreign movies], the cinemas are likely to suffer.”
Reportedly, the minimum amount incurred to import a Hollywood film in Pakistan is US$ 15,000; publicity cost, customs duty and censorship fee included. On the other hand, the minimum cost for a Bollywood movie is US$ 25,000.
According to Mandviwala, in order for the (imported) film to break even, it must make double the money expended. “This is after you have paid the [pre-decided] 50 per cent to the exhibitor and the remaining 50 per cent to the distributor, because otherwise the importer is left with nothing in hand. Add to it the Rs10 lac ‘cost’, in the name of a withholding tax, and you can imagine how miserable things can get.”
Whereas the importer is the first casualty in this war of survival, in the case of TV, the biggest stakeholders are, of course, the entertainment channels. In the last couple of years, cable TV has taken an increasing recourse to Indian soap operas and dubbed Urdu versions of Turkish serials — a trend kicked off last year by Urdu 1, a freshly launched, Dubai-based channel which aired Ishq e Mamnu (originally,Ask-i Memnu), one of Turkey’s most popular serial, also its biggest TV software export to as many as 70 countries across the world.
As Ishq e Mamnu recorded the highest TRPs in Pakistan’s recent history, it obviously propelled the commerce-driven TV channels to jump the bandwagon and grab as many foreign shows as possible, leaving the local producers to suffer.
The channels’ interest obviously lies in the low price (and novelty value) these shows afford them, compared to the local productions which are far more costly. But the TV channels may still be in a good position. As actor cum producer Humayun Saeed puts it, “I am happy that the government took a step in this direction but I think this [the proposed tax] is still a paltry amount; it should have been at least Rs4 lac per episode of a drama.”
He goes on to explain how the average rate for a local production is Rs7-8 lac per episode, whereas the foreign shows “no matter how lavishly produced” cost the TV channels a maximum of Rs1 lac an episode. An additional lac or two wouldn’t make much difference to them.”
But Saeed is only one of the many drama artists and producers who strongly advocate the need for a sort of “a national policy” to check the broadcast of foreign shows on local TV networks and actually banded together last year under the umbrella of the United Producers’ Association (UPA) to launch a formal campaign. The drama fraternity staged street demos, held media conferences and also got some of the prominent political leaders to throw their weight behind them. The proposed tax is likely to tip the scales in their favour, by proving a deterrent in the import of foreign content.
Nadeem Mandviwala doesn’t buy the argument that by competing with foreign content in cinemas or on TV, local productions run the risk of extinction. “We are very clear that if there are no cinemas in Pakistan, there will be no Pakistani films.
“If the debate is around us going for ‘foreign’ product, then why do you have, for instance, vegetables from India? Why not have a similar withholding tax on these products also?
“The government should understand that all new cinemas that are coming up are being built with our own money; no foreign agency or investor is involved in this.”
Mandviwala also speaks of preparing a case to be presented before the government on behalf of the exhibitors and the importers. Since the tax is currently only at the proposal level, he says there’s still a chance they will win.
