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A Method To Uwe Boll's Madness
grandfenwick writes "Ever wonder why Uwe Boll keeps getting bigger budgets and bigger-name actors for his awful film adaptations of videogames? Stuart Wood of Cinema Blend theorizes in an exposé on Boll's methods. His position? Thanks to a loophole in German tax laws, he and his investors actually make *more* money the more a movie tanks at the box office." From the article: "Boll's movies aren't being made out of a love for cinema. They are a shallow exercise in money-making greed and exploitation. Rich Germans getting richer by exploiting the stupidity of the Hollywood system and the naivety of critics like us, who never thought to question the true motives of why these horrible, horrible movies existed. Pure and unfiltered 21st century capitalism." Take with a grain of salt.
According to the article, we don't pile into the theatres at $9 a pop to watch them:
House of the Dead cost $22,000,000 including marketing costs. It's worldwide gross was $13,818,181. That's a LOSS of $9,000,000 by my calculator. Alone in the Dark cost approx $32,000,000 including marketing costs. To date its worldwide gross is $6,040,827. That is an even more impressive LOSS of $26,000,000.
I'd want to doublecheck those numbers, though, based on the author's odd ideas about tax law:
But crucially, the bizarre tax laws in Germany mean that any wealthy Germans who invest in a movie can write-off the production cost, delay paying their taxes and generally reduce their tax burden. When you disseminate all the boring legal business law surrounding it the bottom line is this - the German investors in a movie only pay tax on any RETURNS the movie makes, their investment is 100% deductible, so the minute the movie makes a profit, said investor has to start paying tax.
He first claims that Germany has "bizarre tax laws" which only tax businesses on their profits rather than their costs (isn't that how every country's tax laws work?!), then he seems to believe that a tax writeoff of $1 reduces your tax by $1 (which still wouldn't make the movie investors any money) rather than reducing your taxable income by $1 (which means the investors are still losing money, just not quite as much). I don't know anything about German tax law, but I've seen more than a few people who mistakenly think that's how writeoffs work in the USA, so I'd like to see some references before I believe that Germany's tax code is based on our urban legends.
Plus the investors can actually borrow money to put towards investment and write that off too.
Yes, if you borrow money and lose it, then your taxable income gets reduced by the amount you lost. But why the hell would anyone do that on purpose? Instead of paying (marginal tax rate) * (money borrowed) to the government, you'd have to pay 100% * (money borrowed) to your creditors!
This article explains it in better detail than I ever could:
http://www.slate.com/id/2117309/
Within the studios, this is common knowledge. It's the reason why Hollywood movies never turn a profit, as a rule. Every now and then you hear a story about how someone got screwed by agreeing to take less up front for a share of the profits. (Most recently, Peter Jackson is suing New Line for cooking the books on the LotR movies.)
Hollywood accounting is like Enron strung out on crystal meth. All the sliminess with twice the crazy.
No,it's not capitalism. Under 'pure capitalism' there would be no taxes, no bizzare tax code and the only way to make money from a movie would be for it to make more money than you invested.
All the article says is that (in Germany) money you invest in foriegn films is tax deductible, while you pay normal taxes on the profits.
.505 million euro gain after over no investment, or a 3.8 million euro gain over the movie that tanks). It is clearly in the investors best interest invest in a movie that will make money.
In Germany income taxes work like this (2004):
" a zero tax rate on taxable income up to 7,664
" a marginal tax rate rising form 16% to 45% on taxable income between 7,664 and 52.152
" a marginal tax rate of 45% on taxable income over 52.152"
And money invested in films just doesn't count as taxable income.
So, let's say someone in germany makes a 10 million a year (they would have to make a lot to invest 10+ million euros in a movie). Then, let's say they invest 5 million in a movie that flops, and get no money back. If they never invested, they would have 5.5 million euros left after taxes. Losing 5 million euros, they only 2.25 million euros left.
Run the numbers, it is impossible for a german to have a net gain in his take home income on a film that looses money.
However, if the same German investor invests 5 million euros, and gets back 6 million, at the end of the year they end up with 6.05 million euro(a
Dear god, this isn't even hard math. I mean I did these numbers in 30 seconds without a calculator using nothing more than junior high algebra.
At worst, this trick could help someone defer taxes for a bit, it's no incentive to flop movies.
Not quite. The picture the article paints is a one-time transaction, not a long-term investment they intend to pay off.
Take a closer look at the Tomb Raider situation. They found investors willing to pony up 94 million dollars to buy the rights to Tomb Raider. Paramount then repurchased the film for 83.3 million, making almost 11 million on the deal.
So, you say, how do the Germans make money? Simple:
Suppose you made 94 million dollars in income this year, and lived in Germany. You might be upset by the fact that Germany's income tax tops out at 42.5%. Suddenly, your 94 million dolllar earnings has shrunk to 54 million, a loss of 40 million.
But, if you invest in this movie, and play by the letter of the law, your entire 94 million dollar investment cannot be taxed. So what if you lose 11 million in the tranaction, the government was going to TAX YOU for 40 million if you did nothing.
Thus, it truly is free money.
Man is the animal that laughs.
And occasionally whores for Karma.
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