As Nepali Cinema Soars Globally, Taxes Cripple Local Film Industry: ‘Radical Steps Are Imperative’ (EXCLUSIVE)

The cinema of Nepal has never been more visible internationally but there is an existential crisis at home, say some. Cinemas across the country will remain closed for one day on Feb. 5 in a symbolic gesture to protest against high government taxes.

“Shambhala” is the first Nepalese film to premiere in competition at the upcoming Berlinale, while in 2023 “The Red Suitcase” played at Venice, Zurich and Mumbai and “A Road to a Village” at Toronto and Busan. In addition, Nepal projects regularly get selected to take part in leading international financing markets like the Hong Kong — Asia Film Financing Forum, the Venice Production Bridge and India’s Film Bazaar.

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At home, the industry is contending with a less rosy reality. In the last decade Nepal has been growing its multiplex screens, which have become the main source of revenue for both local and foreign films, a change from the previous decades when single screens used to be the revenue generators. However, the Nepal government has levied a 15% Film Development Board (FDB) tax for foreign films and also a 5% local tax for all films, on top of 13% value added tax (VAT) that is levied on all goods and services. These add up to more than 33% tax per ticket.

“These kinds of taxes are not levied on any other goods and services except tobacco and liquor, and Nepal government views cinema as luxury or non-essential goods or services. While some years ago theaters were able to sustain such high taxes due to high occupancy and less competition, it has been unable to cope with the burden of such high taxes. New projects have stopped and existing cinemas are on the verge of closure,” Bhaskar Dhungana, one of the founders of leading Nepalese multiplex chain QFX Cinemas, told Variety. “Despite promises to end the FDB tax, government has been unwilling to remove it due to the local film lobby who see foreign films as taking over the market. Cinema owners are serious that if government does not reduce taxes on entry fee, then they will protest and shut down the theaters.”

The very survival of the industry has become difficult, says producer Narendra Maharjan who serves as general secretary of the Nepal Film Association (NFA), the non-government body that is backing the closure of cinemas on Feb. 5. Maharjan says that the taxes, which have existed for a long time, have led to the number of screens in the country dwindling from 450 to 150. He added that. unlike across the border in India, where the government gave a 15-year tax holiday to boost the setting up of multiplexes, there was no such facility in Nepal. “Because of the high taxes, corporate houses are not entering the exhibition sector,” Maharjan told Variety.

“I believe that this tax cut is long overdue. Nepali exhibition business is 60% foreign films and 40% Nepali films and heavy taxes on foreign films stalls the growth of new multiplexes which in turn affects the gross receipts of Nepali films. For a few years government should reduce all taxes and let the exhibition business take roots and flourish. They have corporate taxes from which they can make their revenues. This policy is killing the goose that lays the golden eggs,” adds Dhungana.

Whenever the NFA takes up the issue with the government, they are met with proposals for a further increase in taxes, Maharjan, whose credits include blockbuster “Chhadke” (2013), said. He said that the government, instead of finding out the reasons for the alarming decline in screens, is busy chasing those who are late with the FDB tax payment, with the threat of a further 25% penalty. The erosion in screens is posing a direct, existential threat to the production of local Nepali films, which are some 100 every year. “If there are not enough screens to show our films, where do we show the films we produce?” asks Maharjan.

The FDB was set up in 2000 by the Nepal government as “a liaison to facilitate the conceptualization, making, distribution and exhibition of films in Nepal. It also attempts abridging the gap between the film entrepreneurship and the government processes.” Maharjan says that while the concept of the 15% tax on foreign films being used to develop Nepali films is sound, he hasn’t seen it in practice. Variety has reached out to the FDB and its chair for comment.

“The imposition of additional taxes raises critical questions in governance, and running the system,” Anup Poudel, producer of Cannes-winning short “Lori” (2022) told Variety. “This move is counterproductive, because, at a juncture when Nepal’s government should be fostering support, exploring avenues for filmmakers and the industry at large, they are introducing taxes and hikes?”

“The Red Suitcase” producer Ram Krishna Pokharel adds: “The additional Film Development Board tax, which is included in the ticket, can be levied not as tax but as a film fund which should go back to the film community for development and production of quality Nepali films.”

“Properly harnessed, Nepal could be a very good producer of films as well as consumer of films as young urban population understand and speak Nepali, Hindi and English. However, political instability, corrupt systems, insular mindset and poor policy have made it very hard for serious investors and professionals to invest their time and money into this, and therefore the growth has been very very slow and we are far behind most other countries,” Dhungana said.

Meanwhile, if the symbolic protest on Feb. 5 falls on deaf ears, the NFA will call for longer strikes, Maharjan said.

“I advocate for the united stance of all filmmakers. I believe that collective action has the potential to bring about much-needed change. So, the decision to close cinema halls, should be one that is applied by all cinema halls across the nation,” Poudel said. “In a country like Nepal, characterized by unique challenges, radical steps are imperative, because all other incremental measures risk being overlooked.”

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