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Film incentive scheme tainted by conflicts of interest, audit chief says

Auditor-general Odysseas Michaelides

A scheme aimed to promote the audiovisual industry in Cyprus appears to have been tainted by conflicts of interest and the revolving door phenomenon, the auditor-general told MPs on Thursday.

Odysseas Michaelides said the former chairman of Invest Cyprus – the vehicle for promoting the scheme – also happened to be a partner in KPMG, the firm that audited the companies applying for the scheme.

At the same time, he claimed, the committee reviewing film production applications was chaired by the director of Invest Cyprus.

In effect, Michaelides asserted, the chairman of Invest Cyprus would prepare the recommendations [to the government], and then his employee at Invest Cyprus took the applications and reviewed them.

But an official with the finance ministry – the sponsor of the scheme – countered that although the director of Invest Cyprus chaired the review board, his views could be overridden by the other three board members.

Under the cash rebate scheme launched by the Ministry of Finance and Invest Cyprus, the island is used as a location, a place to shoot a movie – and, since productions bring in money, up to 35 per cent of eligible spending is then reimbursed under the scheme.

The movie ‘Jiu Jitsu’, for instance, shot in 2019, racked up around 6,000 hotel nights for its cast and crew, employed dozens of people and built a set (using local contractors) that cost around €300,000, among other expenses. The producers ended up claiming a rebate of around €8 million.

Almost two years after shooting was completed, that money still hasn’t been paid – even though the film was released in the interim.

The production of a second movie, ‘Man of War’, has been aborted, at least in Cyprus.

The scheme currently lies in tatters and has become mired in litigation, both over compensation disputes as well as for defamation. The auditor-general himself is being sued by the producer-director of one the films shot in Cyprus, after Michaelides appeared to cast aspersions on the Hollywood director by suggesting a link to the controversial ‘golden passport’ programme.

In parliament, government officials conceded that the way in which the first two movies were handled was somewhat superficial, but they insisted that once the kinks in the scheme are ironed out it can still yield financial benefits for the island.

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