The British Columbia government is cutting film and TV tax breaks amid an industry boom that drove the cost of the tax credits to nearly half a billion dollars in the last fiscal year – a decision that prompted some within the industry to worry U.S. producers could have second thoughts about bringing their projects to the province.
Finance Minister Mike de Jong followed through on his concerns about the cost of such tax breaks by announcing a plan to cut the basic production-services tax credit by five points – to 28 per cent, from 33 per cent. The credit compensates producers for claimed B.C. labour costs at the designated rate. At the same time, the digital animation or visual-effects tax credit will be cut to 16 per cent, from 17 per cent.
Earlier this year, Mr. de Jong said the province could no longer afford the tax credits, which have soared from an average annual cost of $313-million to $491-million in 2015-16. An increase in production, partly due to the low Canadian dollar, saw producers claiming more tax credits.
British Columbia’s decision to tinker with its tax-credit scheme comes as other jurisdictions have grappled with whether or how governments should support the industry. Saskatchewan got rid of its tax credits. Nova Scotia did the same last year, decimating its production industry. Ontario lowered its tax support last year for foreign productions.
“The feedback we have received from the industry itself is that this is a reasonable approach,” Mr. de Jong told reporters in Victoria. “We’ve settled on these numbers after working with the industry and believe they represent, for the short and medium term at least, a reasonable balance.”
The minister said he would like to get the annual cost of tax credits down to about $400-million, but noted “it’s not an exact science” and it would hinge on the volume of production in the province.
In a concession to the industry, Mr. de Jong said all episodes of a season of a series will be eligible for the current tax rates if principal photography on the first episode begins by Oct. 1, 2016, a start date that would cover most ongoing series produced in British Columbia.
The province has seen several recent high-profile productions, including such feature films as the box-office hit Deadpool and this summer’s Star Trek Beyond.
Television series shot in British Columbia include The Flash, Arrow, The Man in the High Castle and Once Upon a Time. Sound stages are so booked up that producers are making do in warehouses. Film and TV producers – mainly Americans – spent about $2-billion on production in 2014-15.
The industry is estimated to create about 25,000 jobs in the province.
In announcing the cuts, the B.C. Finance Ministry touted consultation and support from the industry, including the Motion Picture Production Industry Association of BC, which was consulted as the government tried to figure out what to do.
Still, there were some reservations.
Peter Mitchell, head of Vancouver Film Studios, which hosted production of Star Trek Beyond, said the industry “could not have asked for a better consultation process” with the province.
However, he said other rival jurisdictions will “absolutely” be hoping to take advantage of Monday’s news, and the tax-credit cuts may deter some producers from coming to British Columbia.
“Are we super happy about a rollback on the tax credits? No. But as far as how much it goes toward meeting the twin goals of reducing the government expenditure and not having a serious impact on jobs, I think it’s about the best we could come to.”
Spencer Chandra Herbert, the B.C. NDP critic for film policy, said the province will remain a “great film destination,” but one that is more vulnerable to an increase in the value of the Canadian dollar.
“We could be back to the days of Save BC Film – many people not working and so forth,” Mr. Chandra Herbert said.
During a 2013 trip to Los Angeles to meet production industry representatives, Mr. Chandra Herbert said he found some impressed by B.C. locations and crews, but others savvy to quickly calculating the value of varied locations. “For some of the shows, a few percentage points in a tax credit would make the difference between here and Ontario or another jurisdiction,” he said.
Surrey Mayor Linda Hepner said her city is managing a production boom that has made particularly enthusiastic use of the new City Hall and civic square. She said she would be taking a close look at Mr. de Jong’s plan, but expressed concerns that any change to a business formula risks “scaring away business.”
Asked about the B.C. situation, Amy Lemisch, the head of the California Film Commission, which is working to hold production in the state and bring back production that has left, said there is a “global” competition for business. The state spends $330-million (U.S.) on tax credits, contributing to an industry with $17-billion in annual spending.
“Savvy producers realize that chasing incentives doesn’t always provide the best value,” Ms. Lemisch said in a statement, speaking of California, but ironically offering a sentiment about locations and crews that echoes the view of some in the B.C. sector who feel the province offers producers more than tax credits.
With a report from Justine Hunter in VictoriaReport Typo/Error