instep analysis
The 'Empire' strikes back:
Cinema and the taxing issue
To tax or not to tax, how much for which film, and ultimately whatever for… these are the questions. Instep tries for answers
By Omair Alavi

The Empire's new move



The cinema industry in Pakistan is just like the very films it screens to the public. It unfolded like a bad B-horror film when it had to deal with meaningless 'local' flicks for nearly 40 years. Then in a 'suspenseful' twist in the tale worthy of any thriller  it was saved by the reintroduction of Bollywood exports less than a decade. After that, just like in and-they-lived-happily-ever-after romances, the industry managed to stand on its feet with their new partner in crime across the border. And now the newly elected government has decided to test its 'comic timing', by proposing to impose a 'new adjustable withholding tax' on the very foreign films that have played savior to our  cinema industry, pulling it out of the doldrums and turning it into a growing urban phenomenon.
The government's decision has been welcomed by our producers and actors (most of whom, mind you, haven't produced a blockbuster in years) but those associated with the cinema business have termed the decision to tax foreign films ‘unjust’. Even reports from newspapers across the border suggest that Bollywood folks are surprised at this development.

Before I move ahead, let me tell you what the government has done that needs to be debated. Just a handful of days after coming into power, the new Pakistan Muslim League (Noon/Nawaz) government decided to propose a tax of 1 million rupees (10 lakhs) on films produced anywhere but in Pakistan, so that the local industry could stand on its feet. Of course, there is barely any local industry in sight, individuals who have the guts to make a film are going ahead and doing it, but they are not the usual Lollywood suspects. Therefore steps other than the one proposed should have been taken, yet the government took the easy way out and proposed an “adjustable withholding tax” to be levied on all foreign films, cutting competition out yet again, which may well lead to a fall in film standards if our local filmmakers aren't challenged by what the world has to offer.

Distributors strike back

Rehmat Fazli, Director Geo Films, terms the decision by the government as shortsighted and confused.
“There are a lot of things the government needs to do before proposing a withholding tax on foreign films, and the first of them is to legalize Indian films,” he told Instep. “There are a lot of loopholes in the decision because basically it is an advance tax on the import of foreign films. If a company brings 12 foreign films in a year, it would give the government 1 crore 20 lakh rupees. How would we know that it would help the local film industry? Does the government have a development fund for Pakistan film industry? The answer is no and I don't think that iss se kisi ko fayeda hoga (anyone will benefit from it).”

There is a lot of ambiguity in the government's decision, claims Rehmat Fazli.

“We don't know at what stage are we supposed to pay this 'withholding' tax? Is it supposed to be paid at the time of custom clearance, before or after the film is censored? No one knows because it is not a well thought out decision at all. Due to this, Hollywood and Bollywood films of small budgets (particularly  animated films for the younger audience) will be dealt a massive blow. If the government is planning to use the money for the revival of cinema, it shouldn't do so by killing the cinema industry because this will benefit no one. There are a lot of talented filmmakers in the country who need money to make films, and the government must help them, even without proposing withholding tax.”

Rehmat Fazli has a point. Pakistan imports dozens of Bollywood and Hollywood films every year. In fact out of the 10 films being screened at this moment, 10 are Bollywood or Hollywood imports. So what is the government trying to do? Is it trying to resurrect a dead industry? Or summoning the ghost of Lollywood, which is wandering around multiplexes hoping to have an airing soon? Let's not forget recent Lollywood offerings like Reema's Love Mein Ghum tanked in the multiplex culture so did Bhai Log. Isn't it safe to assume that Lollywood has passed on to the netherworld as a new cinema culture has come into Pakistan?

Filmmakers are with the Empire

“It's not dead, it's sick,” says renowned filmmaker, director and actor Shahzad Nawaz who advises the government that the tax needs to be higher than the current rate. "The Censor Board takes around just as much for certification, therefore in my opinion; another one million will not make a difference. I long to see a day when the 'sick' industry is given all out support and laws are made to ensure it gets better until we reach a minimum threshold of making at least 30 films a year as a film industry. Until that time, Pakistani films should be given clean distribution - like there should be no foreign film release in the week a Pakistani film is released; that will indicate the real resolve of the State in helping to revive the industry. Like my film Chambaili, which is set to be released abroad in August, all films must be made with pride in Pakistan!”

Shahzad Nawaz is not alone; other filmmakers who feel hard done by foreign competition agree with him. And the government is obviously siding with them - at the expense of the cinema owners and film distributors. This is not the first time that the government has locked horns with cinema owners. It took the 'empire' nearly 40 years to realize that the cinemas of the country need foreign films more than foreign films need Pakistani cinemas! That's why the ban imposed on the import of Indian films after the 1965 Pakistan-India War was partially eased during former President General (retired) Pervez Musharraf's regime. The restrictions were further eased under the People's Party-led government which helped multiplexes and cineplexes become part of the local scene.

Shahzad Nawaz feels that the step by the government is much too late, but in the right direction. "We must realize that the exhibition of Indian films was banned in Pakistan. They were being imported under the garb of UK or USA companies and since it was helping cinema owners, everyone had chosen to turn a blind eye to this blatant disregard to film laws in the country.  Therefore, levying of taxes on import has at least made two things very clear. First, the government has shown its resolve to give the local film industry a breather, and secondly, they have realized the importance of Pakistani 'mind space'.”

The co-producer of Pakistan's latest blockbuster Chambaili also feels that the distributors and exhibitors will be the only ones to abrasively protest against the tax. “Film has a declared 'industry' status, therefore local industry and its protection should be a priority. Hence, my applause for this step in the right direction."

Right direction or left, the fact of the matter is that there is a dearth of entertainment in Pakistan. There were hardly any multiplexes in the country only a few years ago when people gladly paid tickets ranging between 150 to 250 rupees to visit single screen cinemas. Movies like Mughal-e-Azam, King Kong and Khuda Kay Liye did good business in those pre-multiplex days. But with the law and order situation in the country taking a turn for the worse, people have found refuge in multiplexes where they consider themselves safer, enjoy the upscale atmosphere and have no issue in paying tickets as high as 1200 rupees! From a necessity, cinema has become a luxury in no time in Pakistan, and even if the ticket prices are raised, people from the upper middle class and the elite class would definitely prefer watching the movie in a theatre, than at the convenience of their home. The new cinema culture is obviously not for the masses - it is for the classes who don't mind paying more, so how bad is the new tax?

Cinema's side of the story

Nadeem Mandviwalla, the owner and managing director of Mandviwalla Entertainment, feels that this decision by the government will hit the industry hard. “More than 50 per cent of the films being imported at this time are going to be stopped. More than 70 per cent effect will come on the import of Hollywood films,” he points out. “The tax proposed is not a tax on the films; the withholding tax is on the persons or the companies who are importing them and will be collected under the head of 'Advance Tax' of that person or company which will remain adjustable in their yearly tax returns. Moreover, the tax will be collected at the stage of censoring or certifying the film.”

The advent of Cinepax Cinemas in Karachi - where the lowest ticket is higher than the average ticket at Atrium Cinemas - has changed the scenario for Karachiites. There are more options now and both are going 'House Full'! One considers oneself blessed on getting the tickets to 'Sold-Out' blockbusters like Fast and Furious 6 and Yeh Jawaani Hai Deewani which would never have made it to the screens had there not been cineplexes.
Flashback: When the third installment of Fast and Furious franchise was released in the United States in 2006, us Pakistanis got the first film in the franchise, which was released internationally in 2001! Such was the pathetic situation in Pakistan after the 80s that belonged to Urdu films no one really saw, and the 90s to Punjabi flicks nobody cared about except the shrinking rural Punjab circuit. In such a scenario, the rise of multiplexes is more a blessing in disguise than single-screen cinemas, at least for those who can pay the price.

The upper and middle classes have returned to the cinemas, and when you are getting a Hollywood film released on the same day as in United States, who wouldn't want to reserve a seat in whichever cinema it's available? They would even brave the 20 per cent tax levied on beverages because for Iron Man, Superman and Batman, 20 per cent is peanuts compared to the environment in which you get to watch your favorite superheroes. In fact, compared to ticket prices in other parts of the world, cinema is still cheap entertainment here. In the  United States a ticket costs 9 dollars (900 or so rupees) and in the Middle East its equivalent (Bahrain: 8 dollars, Emirates: 9.5 dollars).

Veteran actor and director Jawed Sheikh agrees that cinemas in Pakistan are accessible to the middle class, the ones who are the real target market. “The government has done a good job by taxing foreign films. That way, not only the filmmakers in the country will be encouraged to make quality films that can be shown in multiplexes but with the 10 lakh rupee fee, the distribution would be done in a legalized manner that was unheard of. We should revive cinema culture and keep  ticket prices as per show timings, as it's done in India where the ticket ranges from 90 Indian rupees to 400 Indian rupees, approximately 180 - 800 rupees when converted to our currency.”

Is finding a middle ground possible on this Middle Earth?

Government officials believe that the tax is proposed to keep track of imported films and discourage the reckless import of movies. Good thinking, it seems! But will that not lead to an increase in prices of tickets at cinema halls and multiplexes? Frankly, the government doesn't give a damn!

Nadeem Mandviwalla feels likewise. “The only implication of this advance tax collection is another way of deterring the rebuilding process of the cinema and film industry. This will severely affect the growth of new investments in the development of cinemas in the country which will eventually be detrimental to the growth of Pakistani film production.”

Jawed Sheikh has other ideas. “The cinema trend restarted due to Indian and English films but we should also encourage our own movies. There are many films in the pipeline. I don't mean to say that we shouldn't have Indian films screened in Pakistan, but we must also give space to Pakistani films, because Pakistani product, Pakistaniyon ko dekhna chahye. Films aani chahye bahar se, is se competition milega. We are making good films that are going abroad in festivals, also being shown in India. I am confident that if films like Chambaili are made, multiplexes would welcome them with open arms, no matter how high the tickets are priced. The arrival of Cinepax Cinemas has proved that people have the buying power, and with more cinemas opening in Karachi the industry is more likely to flourish than perish.”

But then, all of Pakistan is not Karachi or Lahore or Islamabad/Rawalpindi…

Rashid Bukhari, Exhibitor of Multan Dreamland Cinema, feels the government has committed an act that can be termed 'childish'. “The government has taken a unilateral decision without consulting the concerned parties, the ones that would be most affected by it. I don't know who advised them but whoever did, had no idea how this decision would affect the cinema industry. Who would get the money the government gets? How would it help the local film scene? By taking money from us and handing it to those who haven't made a film in years would be unjust and unfair! They might welcome the decision but that's because they would be getting funds for doing nothing, I think the government should give the money to parallel cinema, or reconsider the decision due to which a lot of investors would not step into the field of movies.”

The decision has had more negatives than positives, Rashid Bukhari feels. “What's positive is that the government has recognized Indian films and legalized them, so they would now come through the proper channel. The negatives are that they are negating smaller films for no rhyme or reason.”

The nitty gritty of the business of cinema: Star Trek or Star Wars?

Rashid Bukhari makes a valid point. This new tax probably means that films like Shireen Farhad Ki To Nikal Pari, The Reluctant Fundamentalist and Jolly LLB would not be able to get a screening in Pakistan, since they are likely not to recover the one million amount paid on them by the distributors, who will then hestitate to import new exciting, different films because they could lose money big time.

“I think that a grading system should be devised so that big budget, star studded films should be treated differently than smaller films.' Jawed Sheikh says as he proposes a solution. “The A class film with a jaandar cast should be charged 20 lakhs (Dabangg, Chennai Express), B grade movies 10 lakhs (Aashiqui 2, Fast and Furious) and C grade films 5 lakhs (The Reluctant Fundamentalist, Life of Pi) . That way, every film with potential to do well would be screened in Pakistan.”

Rashid Bukhari agrees. “The films must be graded without any bias because otherwise, many good movies would not be able to make it to the screens. The amount, if the government does want to carry on with the withholding tax, must be varied between 1 lakh to 5 lakh rupees otherwise the cinema owners would not be able to feed their screens for 52 weeks of the year!”

And then there is the problem of 'Buy One Large, Get Two Small' offer the Indian production houses offer Pakistan. They give you Dabangg 2 for two low budget flicks, and if they all do well, no one is the wiser. But if Dabangg 2 does well and the other two don't, the exhibitor has to bear the cost since he would be paying 30 lakhs on all three films.

Rashid Bukhari asks if the government was willing to help those who are hit by this decision. “Hollywood films have never had any issues in Pakistan since 1947. I don't know why the government is trying to create a rift now because Hollywood will not feel the aftershocks, we will. The government is targeting multiplexes owners, but does it even know how many multiplexes there are in Pakistan? Less than 10 at the moment, the rest are upgraded single screen cinemas! That's one of the many flaws in the government's way of thinking. If they are really interested in reviving the local film industry, they must not take steps jo industry ko barbaad karain.”
Nadeem Mandviwalla disagrees with the grading of films. “Who and what is going to be the base to decide which film remains in what category? Once again we will open up a way of corruption for the Censor Board or any ministry. Importers will give money to them and get the film categorized to their convenience. Many films which do great films abroad do not do well in our market. A very recent example is The Hobbit which made over a billion dollar business worldwide but flopped in Pakistan. Another example is The Croods which failed in Pakistan but was a blockbuster worldwide.”

The man behind Atrium Cinemas and one of the oldest, deftest hands in the cinema game certainly has a point. So if grading is not acceptable, ticket pricing per show timings is not in the offing, how will the cinema trend survive in the country? The government seems to have other ideas, but that doesn't mean that all its ideas might be put to use. In a country that is involved in the war on terror and has electricity and water shortages to think about, the more pressing issues must be dealt first rather than the revival of the local film industry. One hopes that once the other issues are resolved, things will be back on track and the cinemas and the local film industry will ride into the sunset, 'with or without' holding taxes by the Empire!

Omair Alavi works for

Geo TV and can be contacted at omair78@gmail.com

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Life of Pi did surprisingly well  in Pakistan but Nadeem Mandviwalla had no way of knowing it would. Will he and other distributors shy away from bringing in groundbreaking but risky films because of the new withholding tax?

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Jawed Sheikh is all for finding a middle ground but believes that the local industry needs protection. The million dollar question is, even if foreign films are curtailed will the new cinema going public actually pay money to see Lollywood efforts like Bhai Log?

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Rehmat Fazli of Geo Films isn’t worried about guaranteed box office smashes like Man Of Steel. His concern is for exciting fringe films for Pakistan and especially animated cartoon films for kids that will get hit badly by the proposed tax.

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Shahzad Nawaz’s Chambaili did very well in theatres despite competition from Hollywood and Bollywood films. However he believes that the Pakistan film industry is ‘sick’ and needs to be protected till they are making a healthy 30 films a year!