It's a teenage road movie about finding your identity; it's set in northern Nova Scotia with a 1970s soundtrack provided by Gordon Lightfoot, April Wine, Gino Vannelli and Neil Young. It has a script by the celebrated playwright Daniel MacIvor and it's being shot by the great indie director Bruce McDonald. Will Nineteenseventysomething be the last movie made in Nova Scotia?
That is the alarmist question being raised by its creators because the government of Nova Scotia has just announced it is closing its creative industries agency and cutting by three-quarters the tax credit it gives to film and TV productions.
The Nova Scotia Liberals are not the first government to wonder about the efficacy of offering refundable tax credits – also known as cold, hard cash – to producers of films, TV shows and computer games. The Quebec government has just restored a tax credit for interactive digital media that it had cut last year, while B.C. recently decided to extend a similar credit to 2018. Meanwhile, Ontario is considering how it might contain the cost of its hugely successful credit for interactive media. In the small hours of the morning, bleary-eyed provincial finance bureaucrats desperately trying to balance budgets see the millions that are being paid out as big-ticket film productions or tiny app makers claim refundable tax credits on their local labour costs, and they think to themselves "Aha!" Cuts follow. Outcry follows – think of the jobs losses, the creative industries cry – and often there is a reversal: The argument for these credits is a strong one.
Canadian film producers will tell you that refundable tax credits (which also exist at the federal level) are essential to their projects because they can use their qualification to get bank loans that underwrite production until the credits – usually a percentage of their labour costs and sometimes other expenses – are eventually paid to them. Those on the digital side will explain that Montreal and Vancouver's dynamic interactive industries owe their very existence to the tax credit system.
So, are tax credits a great way of supporting culture? Are they helping create Canadian films and Canadian video games? They may be, but that's not really their purpose; their intention is simply to create jobs and thus generate a lot more tax revenue for government than was initially paid out. After all, tax credits are also used in the automotive and aeronautic industries, and paid to all sorts of companies for their research and development and job training expenses, all for economic reasons.
If politicians will open the public purse at the mere mention of an auto plant, they are also easily convinced that jobs in film, television and game production are desirable. So desirable, that jurisdictions vie with each other to attract production: Most tax credit systems are open to foreign companies as well as Canadian ones. Yes, one of the things those bureaucrats can't help noticing in the small hours is that some of the millions are being paid to Hollywood.
Like auto makers, big producers can go shopping for a friendly place to do business. A smaller jurisdiction like Nova Scotia can effectively shinny its way up the ranks by offering a higher base percentage – like the current 50 per cent it is proposing to effectively cut to 12.5 – while many provinces also offer a bonus percentage if the production takes place outside of a major centre such as Halifax or Toronto. The tax-credit bidding to win those creative industry jobs can get ridiculous, and there has been some talk in B.C. of trying to get Ontario and Quebec to join in on harmonizing their various levels of credit, which are in the 30- to 40-per-cent range. Meanwhile, percentages set high to attract foreign production when the Canadian dollar was strong are not automatically adjusted when the dollar falls.
But if politicians are playing this tricky game, it's because the jobs at stake are highly skilled and well paying. Better yet, jobs in interactive media are often jobs for young workers. And that is how these schemes should be judged: Do they create so many jobs, both in the creative industries and in the service industries they employ, that the income tax the workers pay back more than compensates for the credits? And would those jobs exist at all without the credits in place?
The problem is that independent studies that accurately answer such question are few and far between. The soon-to-be defunct Film and Creative Industries Nova Scotia estimated that, in 2013-14, $24-million in credits generated $139-million in spending and 2,700 jobs. But the provincial finance number crunchers say their analysis shows only $67-million was spent.
If we want to support Nineteenseventysomething because it's a promising Canadian film with talented veterans attached to it, we should give it public grants. If we think it's going to generate tons of local jobs, we should give it tax credits. What Nova Scotia really needs is a reliable way of assessing the numbers.