The rebate to the film production company is essentially a revenue-sharing arrangement between the province and the film company
What a novel idea: corporate tax incentives that link employment generated to the tax a company pays. That's essentially what B.C., and many other provinces, have done to attract film production. However, the BC Liberals have found themselves out of step with other provinces, specifically Ontario and Quebec, which both increased the tax incentive that they offer to film production companies.
Film production in B.C. is a significant sector: $1.19 billion generated in 2012, employing close to 25,000. However, in the last several years, more and more film production has moved to Ontario.
The issue of tax credits is complicated. Why treat film producers any differently than sawmills or cement plants? In part, because film production has a high labour content and is relatively mobile. Also, since the 1970s Canada has pushed to increase Canadian content in a range of cultural industries like music, televisions and film production. These industries support high wage, high skills employment, something that any government would want to see more of.
The B.C. tax credit program allows a film production company to rebate a portion of its total labour costs once production is completed. The incentive for government is that film crews have paid their taxes and spent their incomes locally, direct benefiting the provincial treasury. The rebate to the film production company is essentially a revenue-sharing arrangement between the province and the film company.
There are strong reasons to question the effectiveness of tax incentives for business. Canada's corporate tax rates have moved downward for much of the last decade, a policy first embraced by the federal Liberals under Paul Martin and accelerated by Stephen Harper.
The cumulative impact? Corporations were paying less in taxes but not investing or hiring even though the tax cuts were supposed to encourage both.
Unfortunately, the BC Liberals bought into the tax cut fever in a way that left them little or no room to change. From 2001 onward, they worked on the false assumption that tax cuts – corporate and high income – would solve every problem imaginable, so much so that they even claimed that tax cuts would pay for themselves.
Ten years on, we see just how wrong that claim really was. The film industry tax credit program is by no means a perfect solution. In fact, provinces are now finding themselves caught in a mug's game, each hoping to outmanoeuvre the others. More sensible would be to develop a common front rather than allow film producers to play one province off against another. And we need to make stronger connections between the jobs companies create and the taxes they pay to the public treasury. •
