Creative shortages in TV and media raise novel tax questions

High consumer demand for film and TV content leads to insatiable appetites among streaming companies. Finding the next Squid Game, Bridgerton, or Friends reunion is viewed as key to keeping subscribers locked in as market saturation grows. Producers are deploying novel approaches to keep up, including moving into international ventures. The endeavours raise new possibilities but also new challenges – including tax and regulatory aspects.

“Acute skills shortage threatens British film studios’ production boom,” read a Guardian headline earlier in 2022. The article detailed how a £6 billion bounce-back from COVID has led to an unprecedented demand for experienced production crews. Said crews are, sadly, in short supply – not only in the UK.

The ongoing competition and hunger for content, led by streaming giants like Disney+, Netflix, and Amazon Prime, is a world-wide phenomenon.

The situation has led to casting and filming delays, wage inflation and increased competition over available resources. To mitigate the issues, companies are looking internationally to offshore production or integrate overseas crews into their setup. Their eyes often land on the locations mentioned in BDO’s TV and Media Hotspots publication.

However, such moves can have far-reaching, sometimes unforeseen, consequences.

Shortages abound

Stories of staff and talent shortages abound across the film and TV industry. Australia, Canada, Central Europe, New Zealand, and regions in the USA all face similar issues. 

Which types of staff are in short supply depends on the specific region and country. However, shortages extend across all parts of the production cycles, including:

• Casting directors
• Production planners
• Production accountants
• Photographers
• Grips
• Drivers
• Animators
• Special effects experts
• Post-production supervisors
• Sound mixers

Access to international expert resources

One approach to the issues is to look internationally. Many parts of TV and film production are digital in nature, making it easier to use geographically distributed approaches to production and post-production.

As charted in BDO’s TV and Film hotspots, different regions and countries often have specific skillsets and expertise that can be leveraged throughout the production cycle:

• Australia is particularly strong in visual effects.
• Canada offers good access to production and digital editing specialists.
• Colombia is home to a thriving start-up community of production facilities and technology specialists.
• India is the world's foremost film producer and home to a wealth of experience and talent.
• South Africa has a fully integrated value chain from pre-production over production to post-production.
• The United Kingdom has a proud history of producing high-quality film and TV content that continues to the modern day.

Answering novel questions – also about tax

Integrating more international approaches to TV and film production has many potential upsides, including a chance to reduce overall production costs.

However, there can also be challenges that need to be considered.

One of the central aspects to consider is whether overall prices are likely to become lower by placing production elsewhere. This is particularly pertinent if a production occurs in a country or area that offers tax incentives. Placing too much of a production outside of that jurisdiction can leave you unable to access the tax incentive, thereby increasing the overall costs.

Furthermore, tax and regulatory-related frameworks can cause issues due to the changes to the production units. For example, if a production company looks to hire staff or production units outside of national borders.

This can be a way to mitigate issues related to ensuring access to tax incentives but simultaneously raises questions about the hiring practices. What procedures and practical steps such hirings require will be heavily related to where the main production takes place.

Therefore, will the tax tail start to wag the production dog, or could this regulation stem the creative opportunity that having an international workforce may bring?

BDO’s international network of film and TV experts collaborate with companies throughout the industry. Our services include optimising hiring and related tax and regulatory aspects of productions.