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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.
> So, how can you loose, say, $10 million in making a movie and come out ahead. Surely Germany will not actually GIVE you $10 million in replacement. Can sombody explain this or provide hard numbers for the financially challenged?
I understand it the following way: Say, you're a resident of Germany and make 10 million EUR profit in some way or another, Germany taxes that profit. But, when you reinvest that money, the government will not tax it. It will only tax the profits from that investment. But, what when the investment is not profitable? Well, then it is a loss, and losses aren't taxed.
So, instead of paying a, say, 20% tax, you make a loss of 10%, which is gives you practically a plus of 1 million EUR.
The idea was, that this money is invested in "hard" things, like factories, machinery, and the like, which have a real value.
Almost as interesting as subsidiaries in one nation buying from the main company in different nation compontents to excessive prices, in order to turn their profits in said nation to zero, and pay only taxes in the country of the main company, where the taxes are coincidentally much lower than in the country the profits were originally made.
"Between strong and weak, between rich and poor [...], it is freedom which oppresses and the law which sets free"
Somebody above posted this link: http://www.slate.com/id/2117309/
Basically, to use your example, you spent that $1,000,000 of investor money (not your own). However, you collect investments of $100,000,000 to cover your rediculous budget, and you have a German company as your producer. Under German law, you get that tax deduction before the movie enters production, and then lease the film for your US studio for actual filming. So that's $99,000,000 you basically pocket on your $100m movie that really cost $1m.
Now, let's say your film goes to market and makes $125 million in revinues. By contract obligations, you pay back your investors their $100 million plus interest. Let's say 10% for another 10 million. Or, if you really screwed them, they signed for a percentage of the profits instead of that 10%, which means they get a set percentage out of $25m which could end up being even less. Heck, if you're lucky, the movie won't even make back the budget and your investors also get screwed even out of their full $100m.
All scenarios aside, let's say you agreed to 10% interset on the investment. That means $110m out of the $125m goes back to the investors, and your studio makes another $15m for a grand total of $114m profits on a movie that "cost" $100m and grossed $125m.
It's called cooking the books, it can get you in a lot of trouble, but a lot of companies get away with it for decades. However, if you have a good team of lawyers to handle your contracts and such, you can probably get away with this sort of thing without technically breaking the law.