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Amid a fierce debate over the government of Nova Scotia’s decision to cut a popular film and television tax credit, a key justification for the decision is being called into question.

In order to balance its $97.6-million deficit, the Nova Scotia Finance Department is slashing the tax credit rate, currently one of the most generous in Canada, allowing productions to claim up to 65 per cent in labour costs in rebates from the government. “We simply cannot afford to maintain the credit in its current form,” Finance Minister Diana Whalen said at a budget announcement earlier this month.

Screen Nova Scotia, a group representing film, television and digital media players, is now being joined by a senior partner of the consulting firm whose research was cited by the province in disputing the financial justification behind the government’s decision to slash the credit.

In a document handed out by Nova Scotia Finance Department staff during the budget lockup, the government cites numbers from a 2014 economic report produced by the Canadian Media Production Association (CMPA). Production facts and figures used in the report were provided by the Toronto-based consulting firm Nordicity.

“We say it generates a lot of activity in the province and that activity employs people and they pay taxes,” Nordicity senior partner Peter Lyman said. “Generally, it’s a very good return.”

The annual CMPA report provides an overview of the film industry in the country, using a variety of sources, including figures from Statistics Canada and CBC-Radio Canada. However, Screen Nova Scotia believes the government cherry-picked CMPA estimates for measuring economic activity and full time employment, which it believes is flawed.

Below are some charts comparing the different numbers put forth by Screen Nova Scotia and the Nova Scotia Finance Department.

Ecconomic activity generated by the film industry in Nova Scotia between 2011 and 2013, in millions

SOURCE: Canadian Media production Association and Screen Nova Scotia

Direct and spinoff employment generated by film production in Nova Scotia between 2004 and 2013

SOURCE: Canadian Media Production Association

Cost of the Nova Scotia film tax credit since 1998

The tax credit has been in place since 1993.

SOURCE: Nova Scotia Department of Finance

Nova Scotia has one of the highest film tax credits in the country. A production company can expense 50 per cent of every Nova Scotia-based employee’s labour costs to the government. Bonuses from frequent and countryside filming could bump that up to 65 per cent. A proposed cut that would see the credit reduced to $6-million from $24-million will proceed, however the structure of the incentive has been changed to a regime similar to one in Alberta.

Beginning July 1, the new Nova Scotia Film and Television Production Fund would provide base funding that is 25 per cent refundable for all production costs including labour. There would be an additional two per cent bonus for shooting outside of Halifax, another two per cent for indigenous producers who are shooting their own work and one per cent for series production.

Foreign-service productions would also eligible for the 25-per-cent refundable portion of the fund.

“We’re alive. We have a heartbeat,” said vice-chairman of Screen Nova Scotia Scott Simpson. “We were dead in the water a few weeks ago.”

Government officials said ultimately filmmakers would be eligible to draw from a pool of $10-million in the 2015-16 budget when their portion of a new $6-million creative sector fund is added to the money available for the new incentive.

Officials said a cap of $5-million or less for individual productions is also under consideration, but that could be a potential sticking point for many in the industry.

“If this becomes a $10-million fund that’s first come first serve then we have a problem,” said Mr. Simpson. Although the new fund will keep the industry afloat, it could potentially be half the size it was last year, added Mr. Simpson.

The province provides a subsidy of $42,294 per direct full-time employee for film tax credit-relation production, said the Nova Scotia Finance Department. It also estimated 624 full-time film production employees. That works out to a subsidy rate of 67 per cent – two per cent over the maximum 65 per cent the government promises, which is not feasible accountants from the film industry told CBC’s Information Morning.

More than 2,000 people turned out for a protest at the legislature last week and luminaries, including the Trailer Park Boys and William Shatner, have spoken out against the change.

The last detailed economic study done on the industry was in 2004. The new fund is scheduled to come into effect on July 1.

With files from The Canadian Press

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