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Hobbit racks up $20m for tax rebate

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Mon, 31 Oct 2011 3:40p.m.

John Key and Peter Jackson on the set of the Hobbit

John Key and Peter Jackson on the set of the Hobbit

The production company for Peter Jackson's The Hobbit racked up $20.2 million for its tax rebate in the first actual year of production, according to its financial statements.

The movie, produced by Warner Bros Entertainment' subsidiary 3 Foot 7, recognised the subsidy as part of its $70.9 million annual revenue in the 12 months ended March 31, according to statements lodged with the Companies Office last week.

The bulk of revenue was a fee to fellow subsidiary New Line Productions for production services, though that won't be recognised until the production is wrapped up.

The $20.2 million rebate amounts to 14.4 percent of the $140.6 million annual production cost, just below the 15 percent of locally incurred costs that can be claimed back in tax under the Large Budget Screen Production Grant, known as the qualifying New Zealand production expenditure.

Though the entire project is expected to cost about US $500 million to produce, the total tax rebate may be $50 million to $60 million below the maximum possible rebate of US $75 million, according to media reports.

The period captures pre-production work last year and a couple of months of filming, which kicked off in February this year.

The two-movie project has suffered several delays, including funding woes from MGM, first-choice director Guillermo del Toro quitting and producer Peter Jackson taking over, a threatened actors' boycott, and surgery for Jackson.

Funding for The Hobbit became a political football last year after actors threatened to strike and Warner Bros countered by threatening to film the movie elsewhere.

Prime Minister John Key stepped in to broker a deal with Warner Bros US executives who flew into New Zealand, giving them an extra subsidy of $9.75 million per movie for spending more than $200 million, expanding what spending qualifies for the rebate under the existing rules, and changing employment law to classify all film workers as contractors by default.

The government would also stump up US $10 million to market local tourism as part of The Hobbit's release.

In December last year, Jackson's Weta Digital was awarded $7.2 million over three years under the government's Technology Development Grant Programme.

Weta will be a major contributor to the digital special effects for the two movies.

NZN

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Comments

01 Nov 2011 01:20a.m.

Alan wrote:

Anyone who thinks the world operates on fairness and gamemanship is kidding themselves. This movie is currently employing hundreds of people in an industry that without overseas investment would decline to a very insignificant participant. Many New Zealanders need to get to grips with the fact that the country is insignificant in the world economy.
It might be hard to accept but most countries around the world don't give a crap about here, even Australia considers this country a poor version of Tasmania while many think it is a quaint little island at the bottom of the world. Incentives are needed to attract overseas investment as we are competing against other countries also wanting this investment. Much of these extra handouts were made due to a few painful Aussie controlled union nutters trying to dictate the terms for some actors in NZ. Lets face it the movie company is here because of Peter Jackson. If he didn't want to make it here it would have never even come here. It Peter was not committed to here then it would have gone overseas at the first sign of problems. Anyone complaining about corruption should live in Greece for a while or even the US or Australia if you want to see huge amounts of money wasted.

31 Oct 2011 08:11p.m.

Hamish wrote:

This is no surprise, NZ is a party for big business and a nightmare for the rest of us under National. Wonder why the country is in such dept?

31 Oct 2011 06:36p.m.

RA wrote:

I will be explaining to my grandchildren why hobbit movies will never be allowed in my house, I am sure they will understand .

31 Oct 2011 04:00p.m.

michele wrote:

kick the unions and the workers and now take $20 million out of taxpayers money. the corruption taking place under key is remarkable as $70 million was already the cost paid to the corporate movie men . the once hero jackson is now not such a hero in the workers eyes. key seems to pay business anything they ask while he cuts jobs and funding to the people . the election must see the end of key.