Jordan's cinema back; film tax is flop for fans who missed new movies
The story, with its many angles, points to policy failure, particularly when it comes to the economy. The victims, as usual, are the productive sector, the public at large and the competitiveness of the Jordanian economy.
The Customs Department used to place a duty on movies that were imported for public viewership, of about JD6 per kilogramme. That is, it weighed the film reels and charged the distribution companies this fee plus the other usual fees. This was the situation until 11 months ago when some overzealous official at the Customs Department decided that customs wasn’t making enough money and thought of an opportunity to make more money. The suggestion made then was that movies were to be charged for their intellectual property content; in other words, the value of the movie.
The customs official, who found many sympathisers at the Customs Department, thought of the issue as if Jordanian cinema houses were actually buying the movies, when, as a matter of fact, they simply show the movies and charge a revenue-sharing fee (a percentage of the proceeds from the tickets).
Typically, after the agreed showing period is concluded, the movie reels are shipped back to the distributor(s) or destroyed on site to avoid the reshipment cost. In other words, movie theatres do not buy the movies, they simply earn money from the rights to show them. Hence, requesting that such theatres pay additional fees based on the intellectual property argument is false, to say the least, since they do not own these movies whose value will exceed the GDP of Jordan in any year.
The process was explained time and again to the Customs Department, which decided to have a committee study the issue. It even contacted other departments to ask how to determine the value of intellectual property in the case of movies.
How can the Customs Department determine the intellectual property or value of a movie? The three Spider Man movies made a total of $2.5 billion; the Titanic made over a $1 billion; the Indiana Jones series made billions - to name a few.
What Jordanian firm, or government, for that matter, can afford to own them or would know how to evaluate them? Will Jordan want a share from the proceeds of these movies simply because they are shown in Jordan where not more than one million tickets are sold per year?
As a solution to the problem presented 11 months ago, and yet to be resolved, the Customs Department proposed new tax of 6.5 per cent on movie theatre revenues. In addition, the movie theatres are to present each a performance bond of JD300,000 to the Customs Department.
The government already makes a sizable chunk of money from movie viewership in Jordan’s cinema houses. A sales tax of 16 per cent is being collected from movie theatres for every ticket sold. Given an average ticket price of JD7, the government collects JD1 per ticket, or one million dinars a year from ticket sales alone, not to mention the money it makes on the sale of confectionery at the theatres. Not a bad haul for doing nothing!
Additionally, movie theatres already pay corporate taxes. So the government, through its various taxes, is already making a good sum of money.
On the other hand, the international movie distribution houses and movie production companies have finally become aware of the proposed practice of the Customs Department and acted by ceasing distribution into Jordan. How embarrassing!
They may also raise the issue with their governments, in the US and EU (according to some sources they already did), where the majority of foreign films come from, to cause more embarrassment and possibly loss of foreign aid.
I had predicted in earlier writings on this topic that movie houses may strike and stop showing international movies, which they did. Currently, movie theatres are only showing old movies. Now our only access to new movies is through pirated tapes bought from over the 100 stores clustered downtown.
Jordanians, who preferred to watch movies in theatres, will now resort to the pirated videotape shops, which are in abundance in the country and whose activities are in clear infringement of the intellectual property rights agreements signed by Jordan under the EU-Jordan Association Agreement, the US-Jordan Free Trade Agreement and the TRIPS Agreement of the WTO.
In other words, the act by the Customs Department may encourage greater smuggling of pirated videotapes and, thus, encourage an already illegal (yet seemingly condoned, based on the spread of the pirated videotape shops throughout the Kingdom) action. This is a textbook example of how the government, by overtaxing legitimate activities, is encouraging the black market and intellectual property piracy.
More importantly, given that our own film industry is in the nascent stage, there will be no Jordanian movies in the movie theatres for years to come because under the World Trade Organisation rules, no new customs duties can be imposed, so the new tax will have to be a local tax that is placed equally on Jordanian and foreign-made films.
This is a stipulation of the national treatment rule which says that the same tax has to apply to domestic and foreign products. In other words, we are beginning to burden our own movie industry with taxes before it is even born.
The latter issue is extremely important. While the Royal Film Commission started a few successful programmes aimed at enhancing the competitiveness of the movie cluster in Jordan and is sponsoring the production of several Jordanian movies with the scant resources it has, other government departments are attempting to weaken such industry with the introduction of new taxes. This is not the proper way to create an industry. Never was and never will be.
Furthermore, it shows the discretionary power of public sector employees, their lack of partnership with the private sector, the absence of knowledge of the intricacies of the issues or complete marginalisation of the voices of the wise, and hence, the dearth of vision for the future of the economy.
Is this the policy we desire to encourage the knowledge economy? Where are the voices of the enlightened rulers in the field of economy? I have read a recent interview by a customs official who went into complete denial of the issue and almost hid all the facts.
Instead of completely removing the embarrassing tradition of taxing films by weight, the Customs Department went in the opposite direction and denied any wrongdoing. Someone needs to quickly address this issue before more damage is done.