Two years after B.C. raised its film industry tax credits, the province's film industry is watching closely to see how the demise of the HST might hurt the industry – and whether more incentives are needed to offset that.
B.C. raised its tax credits to compete with Ontario's introduction of an aggressive 25% tax credit on all costs of a film production in that province.
But while North American jurisdictions are racing to roll out an incentives-laden red carpet for Hollywood productions, it's unclear what return B.C. gets for its $200 million annual payout in film tax credits – and how much of it is tax credit-dependent.
Ida Chong, minister of community, sport and cultural development, said she couldn't provide a figure for how much tax revenue B.C.'s film industry generates, but she said the province estimates that the industry spends $1 billion annually on B.C. goods and services.
"A lot of [the $1 billion] is spent purchasing and renting and leasing products from some of our small suppliers – using the catering firms for example – and then they hire people and have payroll taxes that come back to us," she said. "So it is hard to equate or attribute the tax revenues."
Chong added that B.C.'s film industry employs an estimated 25,000 people, directly and indirectly.
"I guess people will want to call [tax credits] subsidy, but it really is an investment into a sector that we can be competitive in, that we can grow, that we can give our young people a new career in. Not everybody wants to go and work in a mine or work in a forest company."
But Jordan Bateman, B.C. director for the Canadian Taxpayers Federation, questioned how much of the film industry's economic impact can directly be tied to film incentives.
He cited a 2005 review of B.C.'s film and television industry carried out by transportation and tourism consultant firm InterVISTAS Consulting Group – the most recent independent analysis of the industry available.
"The interesting thing about this 2005 study is the idea that if B.C. took the radical step of cutting every nickel of tax credit for film, it would only reduce filming in B.C. by 15%," he said. "It's an interesting phenomenon because you have almost a worldwide subsidy war over attracting film into jurisdictions – Saskatchewan spends millions, Ontario spends millions, everyone spends millions – and yet the empirical evidence, at least in 2005, seems to show that it doesn't really matter."
Bateman wants the government to carry out a further independent review to update the 2005 research. "It's been seven years now since this [report] came out," he said. "Let's take the temperature again and see if the same facts are in place – and if they are, let's talk with other premiers in other jurisdictions in Canada about ratcheting down these film subsidies and creating a level playing field."
While the InterVISTAS report did contend that, in 2005, eliminating tax credits would have resulted in a net tax revenue gain of $45 million for the B.C. government, it cautioned that its analysis was based on the premise of rational economic behaviour in the film industry.
"It is important to consider the possibility that there may be a strategic retaliatory response to the elimination of the tax credits by the B.C. government," it said. "The industry response from decision centres in Los Angeles, New York and elsewhere may be to drastically cut production in B.C. in order to 'punish' the province." •
