NZ Approves Tax Break for The Hobbit

What is it about New Zealand that makes it so darn appealing for movie-making? Residents cite the natural beauty of the area. Sir Peter Jackson, producer of such blockbusters as the Lord of the Rings trilogy, might argue that being close to home has advantages (Jackson grew up near Wellington, New Zealand). Actors enjoy a certain amount of privacy when filming. But the cynic in me would suggest a bigger incentive: tax breaks.

The New Zealand government isn’t talking specifics but has confirmed that tax breaks are part of the deal to keep the most recent Jackson project, The Hobbit, in the country. Part of the deal appears to include a tax break of up to 75% of a profit-sharing pool for those set to benefit from the movie – the total amount eligible for the rebate is reportedly close to $15 million.

While the details are not being made completely public, Prime Minister John Key was quick to calm fears that the breaks would surpass those previously granted. Key has reported that the total taxpayer subsidy for the production is far less than the $300 million claimed for the The Lord of the Rings movies. Key said about the deal:

The tax deal involved in The Lord of the Rings was far more generous than even the changed and improved subsidies in the case of The Hobbit. I’m not going to go into all the details but it is by margin of an enormous amount.

Financial incentives (along with labor issues) had proved to be a roadblock in early negotiations between the government and Warner Brothers. Warner Brothers reportedly wanted much more in tax subsidies than New Zealand was willing to offer. Key had said about the discussions:

I think it’s fair to say on the financial side there’s a fair bit of hardball being played on both sides… We have the capacity to move a little bit, but we don’t have the capacity to write out cheques that we can’t afford to cash.

In the end, what they offered appears to be enough with both Keys and Jackson confirming that filming will be in New Zealand.

In addition to the tax breaks, the New Zealand government promised to offset additional costs from Warner Brothers in exchange for publicity. Key was quick to assure taxpayers that this would mean only good things for the country claiming that marketing alone would be worth “tens of millions.” Beyond that, the hope is that other Hollywood film projects would head south to New Zealand instead of north to Canada (the financial and tax climate in California has long since convinced many productions to leave the state). As a result of these most recent negotiations with Warner Brothers, Parliament has extended tax and other incentives other movies filmed in New Zealand with a budget of more than $150 million.

Filming for The Hobbit is set to begin in February 2011. Michael Fassbender, Martin Freeman, Ian McKellen and David Tennant (stop swooning already) are among those actors either confirmed or rumored to be involved in the production.

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