B.C. trims film tax credits for foreign firms

Subsidies for film, digital productions were reaching 'unsustainable' levels, says Finance Minister Mike de Jong

Ryan Reynolds and Tim Miller on the set of Deadpool in Vancouver.

The B.C. government is trimming its film tax credits for foreign movie, TV and game makers after warning the annual costs for taxpayers to subsidize their work was threatening to grow exponentially to unjustifiable levels.

The province’s payout to the industry through the tax credits was forecast to reach $491 million for 2015, up more than 50 per cent from an average of $313 million in the previous three years, and $182 million for 2007-11.

The basic production services tax credit drops from 33 to 28 per cent and the digital animation or visual effects credit dips from 17.5 to 16 per cent.

“We think we’ve arrived at a place that will ensure the industry itself continues to grow and enjoy the success that it has but also there is fairness for other sectors of the B.C. economy,” Finance Minister Mike de Jong told reporters.

He predicted there are still “extremely good days ahead” and said the changes were made after a two-month review and close consultations with the film industry.

“They recognized that we were heading into territory that was unsustainable.”

About 25,000 B.C. jobs depend on the film industry.

Government subsidies refund between $33 and $71 out of every $100 spent by a film company on eligible labour – equivalent to an average of $25,000 for each B.C. worker in the sector.

Because the credits are refundable, companies get them even if they pay little or no tax to government.

De Jong’s move to rein in the tax credits was telegraphed in the February provincial budget, when the review was announced.

That was shortly after the swooning loonie bottomed out around U.S. 68.5 cents, fueling predictions of a record film production year for Hollywood North – and even higher tax credits paid out – because the currency gap has made B.C. even cheaper for U.S. studios.

The dollar has since rebounded to nearly 80 cents, but remains considerably lower than it was from 2010 through 2014.

De Jong said his staff are watching the currency movements and are prepared to take a more flexible approach to adjusting the tax credit rates in future years, if necessary.

He said there’s no question a lower loonie than a couple of years ago is continuing to attract productions, but added so are B.C.’s skilled workforce, spectacular locations, infrastructure and proximity to Hollywood.

A cap on the total credits B.C. would pay out was considered, but rejected. De Jong said studios did not want the uncertainty of not knowing if the cap would be reached and their production would be denied the credit.

The rate changes for foreign producers take effect Oct. 1 but productions or series that at least start shooting by then are grandfathered in at the old rates.

Separate tax credit rates remain unchanged for domestic productions that meet Canadian content guidelines.