VAT increase: A big challenge for the film industry

Difficult problem

The increase in VAT from 5% to 10% is considered a difficult problem that film businesses need to find a solution for in the coming time. In particular, the door to finding investors is increasingly narrowing because the reality shows that cinema has long been a risky industry, while economic people can aim for safer fields.

According to records, in 2024 alone, the number of high-grossing movies was not too much, only Mai (Tran Thanh), Lat mat 7 (Ly Hai)... were very successful in terms of revenue. The number of low-grossing movies, even with producers suffering heavy losses, was not small, typically: Doa hoa mong manh (Mai Thu Huyen), Mong cua (Le Thanh Son), Domino: The last escape (Nguyen Phuc Huy Cuong)... That shows that the Vietnamese film market is still precarious, not really stable and investing in a work is a high risk.

"If taxes double, a 25 billion project will become 26 billion and the film's revenue will have to reach 67 - 69 billion to break even. The break-even point for investors will be higher, which means they will have to consider more carefully when investing in cinema. Because usually they mainly invest because they love it, but if they are investors, they will not choose cinema because it is more risky and adventurous than other industries," said director Charlie Nguyen.

Tran Thanh's movie Mai has a "huge" revenue of more than 500 billion VND

PHOTO: DPCC

Sharing with Thanh Nien , director Nguyen Ngoc Lam commented that the doubling of VAT seems like a small number but makes investors wary. He affirmed that not every film released in theaters can be a big hit like the works of Tran Thanh, Ly Hai... He gave the example of the project The Price of Happiness which had to suffer a loss, thereby affirming that the risk when investing in films is quite high.

"When VAT increases, the most obvious impact is that investors are more limited. The number 5% is not small. People hear that a film's revenue is quite large, but when it is "scratched and bruised", sometimes breaking even or making a profit of 2-3% is very happy," said Ly Minh Thang - director of Cong Tu Bac Lieu .

According to director Charlie Nguyen, the VAT rate increase of 10% not only affects investors and producers, but also has impacts on the quality of films as well as the distribution system. For example, a project with a budget of 25 billion VND must be increased to 26 billion VND or the budget must be kept at that level but the script must be cut or rewritten. Sometimes because of that, producers do not have enough conditions to have the desired cast or personnel.

Director Charlie Nguyen believes that if the budget is higher, investors will consider it more because cinema is a risky investment. "In the end, it will affect the quality of the film and thereby affect the distribution system because the distribution system also needs a developed market. Difficulties from one aspect will affect the other because they are all dependent and interconnected," he said.

The Vietnamese film market also witnessed many films with low revenue, suffering losses when leaving theaters.

PHOTO: DPCC

"A filmmaker cannot do it alone…"

Director Nguyen Quang Dung shared that he and some filmmakers feel sad about the VAT increase. According to the director of the film Dat Rung Phuong Nam , Vietnamese cinema is changing from state-owned films to private films, with some units succeeding but also failing. "Now that things are difficult, we have to try harder. Of course, investment sources will be scarcer now," he said.

In reality, the increase in VAT from 5% to 10% is a big challenge for film businesses, requiring them to consider and solve budget problems when implementing a project. However, from another perspective, this change places great demands on producers and distributors in adjusting quantity and carefully selecting quality products before releasing them in theaters.

The support and assistance of state management agencies is essential in the journey of creating cinematic works. As director Charlie Nguyen shared: "If we want to catch up with the world , the quality of our films and our professional level must be improved. And to do that, filmmakers cannot do it alone but need support from agencies and departments. A director cannot make a film but needs a whole team and many agencies behind him to support him so that he can make a work of higher standards."

Increase VAT on cultural activities and film production to 10%

On the afternoon of November 26, the National Assembly passed the amended Law on Value Added Tax (VAT). In the draft law just passed by the National Assembly, cultural activities, exhibitions, physical education and sports; performing arts; film production; import, distribution and screening of films will be subject to a tax rate of 10% instead of 5% under the current law.

In the report on receiving and revising the draft law of the National Assembly Standing Committee, reported by Chairman of the Finance and Budget Committee Le Quang Manh before the National Assembly voted to approve the draft law, during the discussion, there was a proposal to keep the current regulations on applying the 5% tax rate to cultural activities, exhibitions, sports; performing arts; film production; film import, distribution and screening.

However, according to the explanation of the drafting agency, the cultural activities that need to be favored and encouraged are mainly traditional performing arts and ethnic cultures. Therefore, the draft law has stipulated that "traditional performing arts and folk activities" are subject to a tax rate of 5%.

Regarding other forms of entertainment and art, the drafting agency believes that they have now basically been socialized and highly commercialized. At the same time, one of the main goals of this VAT law amendment is to gradually narrow down the scope of application of the 5% tax rate in order to move towards a unified tax rate of 10%. Therefore, the National Assembly Standing Committee requests to keep the draft law, stipulating 10% for the above goods and services.

Le Hiep

Source: https://thanhnien.vn/thue-vat-tang-thach-thuc-lon-cho-nganh-phim-anh-185241126232309088.htm