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Imported films need some form of taxation

On Feb. 2, the Taxation Agency under the Ministry of Finance (MOF) announced the cancellation of preferential tax treatment for imported films, a practice in place for a quarter century. The cancellation will go into effect on Aug. 1 this year.

This policy is unfamiliar to the public, and its development over the years received little attention from the media. Ironically, a number of media touched on the policy indirectly when reporting on the rising cost of movie tickets, claiming that consumers suffer.

The tax exemption, launched by the MOF in 1979, was a product of political and business interests. This unreasonable policy endured since both domestic and foreign film companies benefited from it. Today, foreign films, especially American films, make up more than 95 percent of the nation's market, while most local companies are in a relatively weak position. Hence, the tax exemption policy has been the subject of much controversy in recent years.

The unfair competition threatening Taiwanese films brought about by the policy is self-evident. It is certainly normal to levy taxes on foreign films. Moreover, the MOF twice requested that the Government Information Office abolish the policy -- in 1994 and 1997.

Foreign films, particularly big-budget Hollywood movies, have enjoyed a significant advantage in the Taiwanese market. The average ticket prices of foreign films in Taiwan is NT$250 (about US$7.9), a similar rate to that of the US, Britain and France. But if we take the average wage and cost of living into account, the ticket price in the US is only about 1/200th of a laborer's monthly salary, but for a laborer in Taiwan, it is about 1/120th. Our ticket prices are therefore considered high. Plus, the profits are generally divided in a seven-to-three ratio between American companies and Taiwanese cinemas in the first week of a film's release. The ratio then decreases progressively by 5 percent per week (6.5 percent to 3.5 in the second week, for example). This is also high compared to neighboring Asian markets.

According to some reports, US companies' reaction to the cancellation of the preferential tax treatment policy was not as strong as expected.

The implementation of a fair tax policy is reasonable. Ticket prices are already high, and foreign companies enjoy many advantages. If cinemas shift the costs to consumers, the media should unite with the consumer and boycott such a practice.

In order to help the Taiwanese film industry -- in addition to creating a fair competitive environment -- more forceful and complete policies are needed.

Wei Ti is an assistant professor of mass communications at Tamkang University.

TRANSLATED BY EDDY CHANG
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