The Government should increase tax relief for money spent on film production to 100 per cent from 80 per cent because of a drop in film and TV production expenditure in the Republic last year, according to IBEC's audiovisual federation.

Figures included in a federation's report published yesterday - The Economic Impact of Film Production in Ireland 1998 - show spending on the production of major TV and film productions fell to £101.3 million (€129 million) in 1998, from £105.3 million in 1997.

A breakdown of this figure shows that Irish expenditure on these productions fell sharply to £58.9 million, from £73.3 million.

At a meeting of the federation yesterday, the chairman, Mr John Cummins, expressed concern that the Republic was no longer as competitive in the international market regarding incentives for film production.

"Declines in the rate of income tax and increased competition from abroad, have eroded the incentive to invest in section 481," he said.

Section 481 enables individual or corporate investors to claim tax relief on the amount spent on a film.

Although it was reduced by 20 per cent to 80 per cent in 1995 it is regarded as a major factor which revitalised the Republic's film industry in the 1990s.

In 1998 it amounted to £59 million of the total source of funding.

Mr Cummins said while he welcomed the Government's decision to extend section 481 tax relief for a further five years in this year's Budget, the restoration of 100 per cent tax relief was necessary. He also urged the Government to implement the Kilkenny Report on the Strategic Development of the Irish Film Industry 2000-2010, as soon as possible.

Funding for feature film and major TV productions fell from £105.3 million to £101.3 million. A breakdown of this shows Irish funding fell from £59.9 million in 1997 to £54.3 million in 1998, while non-Irish funding rose to £47 million from £45.3 million.

Despite the drop in feature film and major TV productions, overall production in the audiovisual sector increased to a record £145 million, an 18 per cent increase on 1997. Direct employment in the sector also increased to 1,690 in 1998, from 1,450 in 1997.

This was achieved in part through a vibrant animation sector which showed an increase of £0.1 million in 1997 to £16.6 million in 1998.

Spending on independent productions rose from £18 million in 1997 to £27 million in 1998. RTE increased its output from £7.2 million to £19.2 million and TnaG maintained its funding at £7.7 million.

TV3 was not included in the figures because it broadcast for for three months in 1998.

But the director of the audiovisual federation, Mr Tommy McCabe, said the independent production sector had been disappointed by the low level of commissions from TV3 to date.

This was echoed by director of Filmakers Ireland, Ms Tania Banotti, who said funding for Irish programming provided by TV3 was disappointing and she would lobby the IRTC to take action when the station's licence came up for renewal.

But the director of operations of TV3, Mr Peter Ennis, said TV3 had never said it would spend a vast amount on Irish productions and, while the station aimed to increase the money available, this had to be set at a realistic level.

The chairman of the audiovisual federation, Mr Cummins, said the body supported RTE's request for an indexation of the licence fee as long as there was public accountability built into the spend.