If you’ve ever seen a film that was filmed in Georgia, USA, the evidence is unmistakable. After the movie credits, the Georgia Peach logo is prominently displayed. This logo serves more than an aesthetic purpose; it signifies that the production took place within the state, participating in the Georgia Entertainment Industry Investment Act. In 2005, this act was enacted to lure film and television productions to Georgia by offering transferable tax credits amounting to 20% for qualified local expenditures.
Before this incentive, Georgia’s film industry was somewhat dormant, producing only a few films each year with minimal economic impact. The introduction of the tax credit program catalyzed a surge in film production, propelling Georgia to the forefront as a premier film production locale. While it is challenging to ascertain the exact number of films that have featured the Georgia emblem over the years, 455 television and movie projects were filmed in Georgia during the June 2018 fiscal year alone. Renowned Hollywood blockbusters such as “The Hunger Games,” “Black Panther,” and “Spider-Man: No Way Home” were drawn to Georgia. This ultimately results in the creation of thousands of jobs and stimulating growth in sectors including construction, hospitality, and transportation.
Over the last 20 years, tax incentives have become a popular way for governments to attract lucrative foreign shoots and boost local productions. From popular countries like Canada and Germany to less obvious ones like Saudi Arabia and Fiji, compete to offer the most attractive packages and capture the interest of the world’s biggest film studios and producers. However, not many African countries have seized the opportunities of film tax incentives.
Recently, Ghana announced a new initiative offering a 20% tax rebate for strategic film productions. The law, unveiled by President Nana Akufo-Addo during a State of the Nation address implements film financing reliefs which include exemptions on import duties for film production equipment and on port taxes plus other cash levies, and income tax benefits in addition to the 20% rebate. Local companies that may choose to financially back the sector will also benefit from these incentives.
Ghana’s recent initiative, film production incentives in Africa were limited to just three countries. In 2004, South Africa introduced a rebate program that provides a 25% rebate on qualifying local production expenses. This amount was later increased from 25% up to 35% for local productions. This incentive has been instrumental in drawing a host of international productions to the country, contributing an estimated $1.5 billion in foreign direct investment to the South African economy in 2018 alone. It was also instrumental in the bulk share of Netflix’s investment in Africa.
Morocco and Mauritius are the other two African nations with similar incentives, offering tax credits of 20% and 40%, respectively, on eligible production costs. These incentives have played a significant role in diversifying the economies of these countries, particularly in Mauritius, where the blue economy has been traditionally dominant. A surge in film production further encourages investments in critical infrastructure, such as studios and sound stages, fostering long-term economic growth across various sectors.
Notably, Nigeria, home to the largest film industry in Africa by volume, often referred to as “Nollywood,” does not currently offer film tax incentives. This presents a significant challenge for Nigerian filmmakers, who often struggle to secure funding for their projects. A UNESCO report highlights that financial access is the biggest challenge impeding African filmmakers, affecting both production and distribution. African governments typically allocate less than 0.5% of their national budgets to cultural sectors.
However, the long-term effectiveness and true economic impact of film incentives remain debatable. Data from research center the Mercatus Center shows that for every dollar in tax credits granted, only about $0.60 in new economic activity is generated on average. This raises concerns that the costs associated with tax breaks may not be justified by the revenue they produce. Smaller film industries, which face more challenges in securing funding and resources, might find that tax incentives exacerbate their financial constraints without a corresponding increase in revenue. This is particularly true if they cannot compete with larger productions that reap greater benefits from such incentives. For larger industries like Nollywood, which has a high volume of productions, the cost of tax breaks might be justifiable. However, the predominantly informal nature of the industry and the lack of transparent data complicate the assessment of their true cost-effectiveness.
Moreover, states or countries with film tax incentives tend to reduce their incentive rates over time as other states implement similar programs. This suggests a potential “race to the bottom” where these industries compete by offering increasingly generous tax breaks. Smaller industries are especially vulnerable to this effect as they may feel compelled to offer more substantial incentives to remain competitive with larger nations or established industries. Moreover, film tax incentives tend to favor large, established production companies and offer little support to smaller, independent filmmakers. In the early 2010s, the Tax Foundation observed a global decline in the number of states offering film tax incentives, inspired by the growing skepticism about their effectiveness and sustainability. Another study from the USC Price School of Public Policy finds that film tax incentives generally have no impact on motion picture employment. However, more countries have shown a renewed interest in film tax incentive programs in recent years.
Currently, Africa’s film industry generates an estimated $5 billion in revenue and employs over 5 million people. The industry has the potential to generate $20 billion, both from established industries like Nigeria’s Nollywood and budding ones like Tanzania’s Swahilliwood. However, the decision of whether or not to implement film tax incentives is a complex one. Each country must weigh the potential benefits and drawbacks carefully.
