Minister plans review of Iceland’s film rebate system

Iceland’s minister for culture, innovation and higher education, Logi Einarsson, plans to review the country’s film production rebate system this winter, mbl.is reports. He intends to establish a rapid-response working group in the autumn to prepare proposed changes and submit a bill to Alþingi, Iceland’s parliament, in February next year.

“We want to simplify a system that is 25 years old and has been amended every two or three years. It has therefore become a repeatedly patched document,” Logi told Morgunblaðið. He said the aim was to create greater predictability for both the film industry and the state treasury and to make the system clearer.

Morgunblaðið has reported extensively on the rebate scheme in recent years. Last week, it reported that 3.8 billion Icelandic krónur had been paid from the state treasury under the system this year. The largest payment, 870 million krónur, was made for the major film The Odyssey.

Studies point to economic returns

The rebate scheme has been controversial during its more than quarter-century of operation. Legislation on film production rebates took effect in 1999, when the rebate rate was 12%. The first payment was made in 2001. The rate rose to 14% in 2006, 20% in 2009 and 25% in 2016. In 2022, it increased to 35% subject to certain conditions concerning the size of projects.

Critics have repeatedly argued that the scheme is unnecessary support not available to other industries. Some say they see no benefit from it.

Previous Morgunblaðið coverage has cited foreign studies showing strong economic returns from film projects. In Ireland, for example, the assumed multiplier is four, meaning that every euro brought in generates four euros for the economy.

A 2024 assessment by the British consultancy Olsberg SPI of the economic benefits of Iceland’s film rebate scheme found that the returns could be even higher. It said that every króna channelled through the scheme generated 6.8 krónur in benefits for the Icelandic economy when direct, indirect and induced effects were included.

Logi agreed with the findings and pointed to the multiplier effects of film projects.

“We must not forget that these are, of course, rebates. They are revenues that have come into the state treasury and created jobs in different sectors. It is not only artists who work on these projects, but also carpenters, cooks and hotel owners,” he said.

He added that the industry had spread throughout the country, meaning it could also serve as a form of regional development policy. The rebate had also helped promote Iceland as a destination, he said.

Logi said he understood that the amounts involved were large. He said it was therefore important to consider the overall picture and assess whether the benefits outweighed the disadvantages.

“The purpose of government is always first and foremost to strengthen economic growth and the economy and create income. We are not throwing money out of the window,” he said.