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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.
Does this mean "Springtime for Hitler" will be on the Resident Evil 3 soundtrack?
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...if we want Uwe Boll to stop making shitty video game knockoff movies, we have to go see one enough times so that it makes a profit and his financial backers lose money?
Jesus, that's quite the kick in the head, eh?
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!
See, the way a tax write-off works is, if I throw $1,000,000 into a tax-deductible expense, then I don't pay taxes on that $1,000,000. So, I'm out my $1,000,000 but being in the 40% tax bracket, I save $400,000. But that's still $600,000 that I've lost with no compensation other than seeing my name in the credits of a really bad movie.
Maybe there's another thing involved besides straightforward tax deductions, but the situation wasn't explained very well.
Possibly what he's meant is that if you invest $1 million you don't pay taxes on that $1 million (because it's deducted) and you only pay taxes on returns from that $1 million that are in -excess- of $1 million. (If by 'returns' he means return-on-investment, ie, net profits, and not box office returns, ie, gross profits, that could be what he's trying to say). So, if I make a movie that exactly breaks even then I'd get all my money back -and- not pay taxes on it. In which case it's not true that you make money by tanking at the box office, but by breaking even. It would also be a really, really dumb way to write a tax law, but such dumb laws -have- been written before when trying to 'stimulate investment'... or by corrupt legistlators. I just wouldn't expect to see anything that dumb in a first world nation in this century.
Anybody out there know anything about german finance laws?
--Parity
'Card carrying' member of the EFF.
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.
> 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"
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.
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