Vancouver: Representatives from Revenue Canada, the Motion Picture Association of America and an ad hoc group of Canadian producers convened in Vancouver Feb. 23 to come up with solutions to the simmering taxation crisis for the service production industry in Canada.

While the specific content of discussions has not been disclosed, a second meeting later this month is expected to bring a negotiated resolution that promises to be acceptable to both u.s. production executives and RevCan and will maintain the lucrative service industry.

A quick end to the issue will come as huge relief for service producers, the production personnel who work with the u.s. broadcasters and studios that come north looking for skilled crews and an attractive dollar exchange rate.

‘There is a way through this maze,’ says B.C. Film Commissioner Pete Mitchell. ‘Clearly, the status quo is not satisfactory over the long term for Revenue Canada. However, I am confident that we will maintain stability and predictability.’

The crisis hit Jan. 1 when RevCan decided it could no longer turn a blind eye to the letter of the law and continue to allow above-the-line film personnel to simply pay a 15% withholding tax on monies earned in Canada.

Instead, RevCan wants full tax filings declaring earnings made in Canada and requiring tax rates of up to 55%.

While for u.s. residents these taxes would be applied as credits toward Internal Revenue Service and many state tax authorities, such credits do not apply to California state tax. In essence, above-the-line workers based in California, where the majority of film people reside, would have to pay double taxation, a situation devastating to the Canadian service industry.

Addressing the industry concern, federal Revenue Minister Herb Dhaliwal granted on Jan. 22 a one-year reprieve against stepped-up taxation. And the industry has been quick to use the grace period to make its case to RevCan.

As part of the Feb. 23 meeting in Vancouver, delegates were given a tour of the local service industry and then flown to Los Angeles to take a similar tour.

At issue now is the withholding amount, the waiver period (or how long a non-Canadian can work here without filing a tax return) and, in general, the definition of fixed base – where someone ultimately pays taxes.