By Usman Ghafoor

April this year saw the much-dreaded 65 percent entertainment duty, levied by the Punjab government, come back in effect (it was an olden tax but the government had regularly been offering relaxation and exemption). As a natural corollary, almost all cinema houses across the province jacked up their ticket rates, leaving the common film buff to grumble.

Though the angst of the film viewer cannot be overlooked in this scenario, cinema owners (or exhibitors) like to believe that the imposition of tax is their issue primarily, since it translates into a major drop in business, especially at a time when the industry was barely surviving. One of Lahore’s most popular — and most prosperous — cinema houses, DHA alone registered a sharp drop in audience turnout of up to 30 percent, ever since the hike in ticket rate — from Rs 350 to now Rs 500. Pindi’s multi-screen Cinepax, considered to be the crowning glory of theatre halls in the entire region (including twin city Islamabad), suffered likewise with tickets now priced at Rs 250 for pre-5pm shows and Rs 350 for post-5pm as well as weekend shows — an obvious jump from only about a month-old Rs 200 and Rs 300 respectively. As for smaller centres like Kamonke’s Neelum, Gujranwala’s Zinco Palace and Sargodha’s Shaheen, the current rates are higher by at least Rs 30 and the exhibitors can’t stop complaining.

According to Jahanzeb Baig, the owner of Plaza and Mehfil theatres in Lahore and also the chairman of Pakistan Film Exhibitors Association, “[the tax has meant] total or partial loss to exhibitors all over [Punjab].

The story so far

Early this year, Jahanzeb led a delegation to meet Mian Shahbaz Sharif, requesting him to review the situation. The CM formed a committee that was headed by Senator Pervez Bashir. The committee agreed, in principle, that there ought to be no tax on entertainment, while the secretary finance said there should be 15 percent tax and the secretary excise put it down to 20 percent. Finally, it was decided that the screening of Pakistani films would be exempted from tax but it would remain 65 percent as before, on Indian and English movies, as per the (Punjab) Entertainments Duty Act, 1958.

“The world has changed drastically since 1958,” contends Zoraiz Lashari, the owner of Lahore’s Sozo cinema, talking to TNS. “It is ironic that restaurants which are a booming industry should get away with only 15 percent tax but cinema, despite being a near-finished industry, has to put up with 65 percent.”

According to Lashari, “Basically, the government wants to target the business of four elite cinemas in the region — Lahore’s Cinestar, DHA and Sozo and Pindi’s Cinepax. But it’s the small centres that have ended up suffering the most; they have no choice but to stop screening Indian and English products.”

In April 2010, the cinemas in Punjab were issued notices of arrears of the previous months (starting July 1, 2009), whereby Cinestar had to pay approx Rs 90 lakhs, Gulistan Rs 55 lakhs, and so on. Current tax recovery also began, forcing most cinema owners to readjust their ticket prices. Jahanzeb moved court and took stay order that was to expire on May 15. Eventually, the case was deferred to the larger bench that allowed staggering of arrears.

On the other hand, the projects of new multiplexes that were in the pipeline were now stalled, because the investors saw their margin of profit as reducing by 65 percent.

Zoraiz says the tax was imposed “at the behest of a certain group of [Lollywood] actors and directors who have long contested the import of Bollywood movies. They know they don’t have anything to lose if the tax is imposed; it’s either us or the public that has to suffer.”

There’s another stakeholder in the scheme of things — the importer/distributor. “His cost has increased correspondingly,” says Zoraiz. “If the decision is not reviewed, no distributor will commit to a product, and there will be a vacuum.”

Closely related to this is the fact that Lollywood is not producing many (read any) movies. This year so far, only one film — Channa Suchi Muchi — was released, which proved a washout at the box office. To quote Imran Mumtaz, Head of Operations, Cinepax, the “government has exempted from tax an industry that is not producing any film. So, who gets to benefit actually?”

“These are tough times for cinema. The public has no buying power either. So, the taxation should be reasonable,” he pleads.

Price positioning

Defending the hike in ticket rates, Jahanzeb says, “It’s the dynamic of the business. For instance, Plaza was charging Rs 150, but now it’s charging Rs 200; so, on the face of it, you will say that we raised our ticket fare, but the reality is that we actually only reduced it to Rs 131; the remaining Rs 69 being the tax portion that we’ve had to add. My take-home is Rs 131 now, whereas earlier it was Rs 150. Cinestar and DHA have done the same.”

There’s the rub: the public gets to buy the ticket at the same rate for a Pakistani film, even though the latter is exempted from duty. Jahanzeb has an explanation: “The price positioning is not that of the film, it’s that of the cinema.

“See, if we are a high-end cinema and we are offering exclusive services and charging Rs 400, we are doing so for a blockbuster film as well as for a film that is a dead flop.

“So, strategically and technically, it is always the cinema that creates a price. Those who say why not reduce the rate for a Pakistani film do not understand the business norm.

“However, in this case, the share of profit will be greater for the distributor of a Pakistani film, which means that actually the loss is that of the importer as well as the exhibitor.”

Not cine-goer friendly

As the picture emerges, the entire package deal remains anything but cine-goer friendly. Both Jahanzeb and Imran agree but they insist that the direct effect that the government wanted to achieve –that if Pakistani films are declared tax-free, they will begin to prosper — is only “a misappropriation”.

“You can say that this way we may be able to discourage the importers of Indian and English product, but I can assure you we are not exactly promoting our own cinema,” says Jahanzeb. “For us, for many years, the biggest issue has been the fact that people had stopped going to the cinemas. We chose Indian product only to help the situation and to keep the ball rolling, not to create a bad situation for local films. In any case, Lollywood today is kaput; so that should explain our standpoint.”
Source: The News
Date:5/30/2010