Tax Reform: Blessing or Curse for Cinema Industry in Colombia?

Since the beginning of April, in Colombia there is only one issue that has stolen as many or more cameras than the third peak of COVID-19: Tax reform. The one called by the national government as the 'Sustainable Solidarity Law' aims to raise more than 26 thousand billion pesos (7 billion dollars) which is planned to help the economy in the country.

Now, for what the government of President Iván Duque is a "necessary evil" for the economic reactivation of Colombia, for various sectors, both political and social, the reform will end up breaking what COVID-19 has not achieved.

One of the most criticized points has been the changes that Law 814 (Film Law) would undergo , specifically the Fund for Cinematographic Development (FDC). By changing this mechanism, which lives under the framework of the aforementioned law, the form of collection with which the creation, execution and sale of cinematographic projects in Colombia is currently sustained would be affected.

What is the Film Law and the FDC?

In 2003, Law 814 was signed, which, due to its role in strengthening the film industry in Colombia, is known as the Film Law; a strategy that was born as a way, according to the Ministry of Culture , "to facilitate film production in Colombia and contribute to gradually converting it into a sustainable industry."

In this way, it was possible to establish a self-sustaining industrial chain with which to support the “assembly” line of Colombian cinema, made up of those who produce the tapes, passing through the distributors and ending in the exhibitors.

On the other hand, the Ministry indicates that within this law is the FDC, which, in short, is a strategy that feeds on the parafiscals generated by all the components of the industry. That is to say, from each of the tickets that are bought when entering the country's movie theater, a small percentage is taken and is "returned to that same sector," and thus a self-sustaining circle of the seventh art is created in Colombia.

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How would the FDC be affected by the tax reform?

The project indicates that, to guarantee the optimal development of the film industry in Colombia, it is necessary to eliminate the independence that the FDC has in collecting its own funds, and that it is the national government that takes control of the parafiscals, adds them to the General Budget of the Nation and, from this, to be able to grant a certain part to the fund.

“The purpose of this measure is the sustainability of the FDC (…) This is a measure that does not seek fiscal sustainability, in fact, it is part of the solidarity component”, explained the Minister of Culture of Colombia, Felipe Buitrago, in an interview with El Espectador.

On paper, the strategy would positively impact the cinema, since the reform ensures that the Government could not guarantee the industry less than the 33 billion pesos of the 2019 tax collection.

This would not be negligible, taking into account that, according to Radiónica, in 2020, this figure decreased considerably (82%) causing the Ministry of Culture to even have to support national cinematography with a shift of 5 billion pesos who went directly to the FDC.

However, beyond the economic benefit, for the opponents of this point of the reform, the problem stems from the loss of independence that currently grants the Film Law to the Fund for Cinematographic Development.

"In public administration, it is not the same to have your own income such as the parafiscal contribution that enters directly, to have to depend on the General Budget of the Nation and wait for the entire lobby to be effective so that the budget allocation is possible," said the representative to the Chamber, José Daniel López, in statements collected by El País de Cali.

So, while the Government defends that the transformation of the Film Law means ensuring a significant budget for the creation of audiovisual productions in Colombia, for opponents, the decision to generate FDC resources from the General Budget could be a temptation to generate cases of corruption and bureaucratic failures through this money.