King size rebate for Jackson's movie 

Peter Jackson's remake of King Kong may have been a monster hit but it has cost New Zealand taxpayers $25 million - a tax incentive which the government insists is worth every penny.

Everything about King Kong is big. The beast, the budget and also it seems the bill to the New Zealand taxpayer. Hollywood giant Universal, which bankrolled Jackson's movie, also looks set for a big day with a refund cheque from the Inland Revenue Department (IRD).

"By employing him as writer, producer, director, and his team and his company they were going to get a subsidy which could be as high as $25 million," says Hollywood commentator Edward Jay Epstein.

That subsidy is part of a government scheme to lure big budget movies to New Zealand. Companies which spend more than $50 million in New Zealand get 12.5% of it back.

The scheme was set up two years ago after a loophole which allowed the Lord of the Rings to pick up more than $200 million in tax breaks was closed.

"There have been a lot of loopholes in the New Zealand tax law in the past and people have driven bulldozers through them," says Economic Development Minister Trevor Mallard.

"This was set up because we were told that it was vital to have some sort of incentives to get these major productions here," he says.

The local film industry agrees but says more should be done for low budget movies.

"It's generally only the larger productions that can actually have the budget to survive right through the movie and then claim that rebate at the end - smaller productions just don't have that financial advantage," says Tim Thorpe.

Mallard says he will consider changes to the scheme in the next few months but he remains convinced that if the tax breaks don't exist the big studios will simply go elsewhere.