Readers will likely have heard that today Donald Trump has once again mooted putting a 100% tariff on foreign films. 

In a former life I was involved in the administration of the Location Tax Offset in the Department of Communications and the Arts, so I know a (very) little bit about film budgets and production. And to say they are complicated is an understatement of the order of saying Donald Trump seems a bit iffy on issues of race. 

The problem of course is that if this tariff did come into effect (and Trump has often thrown out a few thought bubbles that have come to nought so let’s not assume anything) it would destroy Australia’s film sector. 

Our film sector relies of tax offsets that give a 30% tax rebate on any expenditure done on the film in Australia. This is why we had films like The Fall Guy made here – it was good value for the film company to make it here. (especially given US$1 = around A$1.50). It is also good for the local film production crew because they get to work on a big budget film that means they can invest in better equipment, employ more people than they could were they only reliant on local film. It also means (theoretically at least) that when working on local films they also can make use of the new equipment, so we end up with better Australian films. 

A 100% tariff would make producing US films in Australia unviable, and given it would also make selling Australian films to the US double the cost, it would reduce a great deal of the incentive for making local films, if you effectively had no chance of selling it to the biggest film market. 

But – and it is a big BUT – how would the tariff be levied? 

When you import a good – like a car –  you pay a tariff as it comes through customs. That’s not how film production works. Let’s say a US film company makes a film in Sydney – what is the thing that is having a tariff on it? Do you charge a tariff on the cost of making the film? What if only part of the film is made in Australia? What if only the PDV (special effects) is done here (we have a number of world leading PDV companies)? What is the tariff then? 

Putting a tariff on services is tough because services are paid outside of the US – so there is no point for the US govt to hold up an import until a tariff is paid. It could be easier for film in theatres – you could potentially find a way to slap a tax on cinema tickets for certain films, but what about streaming where there is no cost on an individual film or TV show?

Putting a tariff on Australian made films would be somewhat easier – but that would do precisely zero for the US film industry. The big thing Trump wants to prevent is US films being made overseas – and that is a much tougher thing to put a tariff on. 

So let us wait and see where this goes. My gut says it is more of a threat for companies like Disney etc to do what Trump wants with people like Jimmy Kimmel than anything else.