(More on the Reform of the Royal Decree Regulating the Film Law)
To cap off a month full of cinema, with the Goya Awards still fresh in our minds, the government launched a public consultation today regarding the amendment of Royal Decree 1085/2015, dated December 4, which implements Law 55/2007, dated December 28, on Cinema.
The Royal Decree in question is the cornerstone upon which the entire regulatory system for Spanish cinema is based and includes, of course, the foundation for public subsidies, but also a multitude of other issues, such as the functioning of the advisory and supervisory bodies of the Institute of Cinematography, the penalty system, the rating of audiovisual content, and much more.
As for the text being made available today for public comment—on which any citizen can provide input until February 19— it is an update to the legal text, which is the bare minimum considering that the law on which it is based dates back to 2007—a little over twelve years ago, which is practically the Jurassic era for a sector that is constantly reinventing and updating itself.
This is not a comprehensive reform, but rather involves only a few articles of the 2015 text. Furthermore, many of the reforms are procedural rather than substantive, or are due to regulatory changes that occurred after the original Royal Decree and that are already applicable even without the reform now being incorporated. Such is the case, for example, with the references in Article 4.2 of the new draft to Law 39/2015 on Administrative Procedure, or the reference in Article 36 to Law 40/2015 on the Public Sector.
There are, however, some reforms—driven by practical realities—that were sorely needed. This is the case, for example, with Article 10.3 of the draft regarding the management of co-productions. The current regulation requires that any matter related to this section be resolved before filming begins. This means that producers cannot access funds from foreign co-producers interested in participating in the project for this reason, which, in very extreme cases (fortunately, only a few), can prevent the project from being completed. The rule, quite reasonably, includes an exception to the general rule, so that financial co-productions can still be approved even after filming has begun.
The cornerstone of the reform, of course, is Article 21.2 of the draft, which regulates the limits on state aid. These limits determine the amount of public funding an audiovisual project can receive and are predefined by the European Union. It is up to each Member State to determine the content of works defined as “challenging”—that is, those with a more limited commercial reach, which may face greater financing difficulties and would be doomed to disappear without additional support.
The definition of “difficult work” varies widely across the European Union and allows for a specific type of work in a particular EU member state to receive special protection, exceeding the 50% threshold that is standard in the industry. Each country, of course, established its own definitions, leading to a sort of “arms race” in this regard.
Spain wasn't particularly bold when it came to classifying a work as difficult in the 2015 regulations, which is not helpful to producers and creators, who have to compete with neighboring countries that have adopted such measures. This forces business owners in the Spanish industry to accept smaller stakes, prolonging production processes as they seek financing and losing competitiveness in attracting film shoots to our country (and the resulting jobs), etc.
The turning point in this particular race came in Italy when, two years ago, it introduced a package of laws that made substantial changes to its domestic regulations (based, of course, on the French system). The new regulations defined any Italian production with a budget under 2.5 million euros as a “difficult production” and allowed for 100% public funding for these projects. This, combined with a quasi-automatic subsidy program, a robust tax incentive scheme, and a 60% increase in the amount of public funds available to the sector—bringing the total to 400 million euros—is no small feat, especially when we consider that Spain, at the national level, barely reaches a total of 70 million euros in this type of aid.
The reform now proposed in this legislative bill—while not a panacea for Italy and a far cry from the French system—introduces improvements that make it possible to support particularly vulnerable projects that, until now, had no special protection. Among these are projects led by people with disabilities, those led by women, and projects of special cultural and artistic value that require exceptional support.
However, the reform falls short. Beyond the effort that the approval of the bill under consideration undoubtedly represents—and will continue to represent—for the government, this is merely the isolated voice of the Ministry of Culture. It is well known that, as of today, the audiovisual production system could not sustain its current pace were it not for the tax incentive system, which opens the door to private financing and makes our country attractive to foreign producers.
For the proposed amendment to be fully effective, it must be coordinated with the specific tax regulations we have indicated, as set forth in Article 36.1 of the Corporate Income Tax Law. Otherwise, there will continue to be two separate spheres—one tax-related and the other regulatory—and the latter must be reconciled to ensure a coherent and secure legal framework for the sector.
Author: Mabel Klimt