Vancouver: The federal Ministry of National Revenue and representatives of the Canadian film and television industry have collaborated to resolve the burning issue of how non-resident film workers – such as marquee actors – are taxed in Canada.

The tax crisis, which broke in January when Revenue Canada announced it was replacing the standard 15% withholding tax for foreign actors and film workers with full tax filings and a 55% tax rate, threatened to undo the burgeoning service production industry in Canada.

Specifically, California residents who worked on productions in Canada were going to face double taxation because of the lack of a reciprocal tax agreement with California. Additionally, the cost of indemnifying against increased taxation was expected to prove prohibitive to foreign producers wanting to work in Canada. The industry was given a reprieve to Jan. 1, 2000.

On July 8, however, Revenue Minister Herb Dhaliwal announced the formation of three new committees to manage film-industry tax policy and encourage continued service production growth.

The new Film Services Tax Unit, to begin in January, will comprise 20 RevCan members in Canada’s major film centres assigned to assess the expenses and revenues of non-resident film workers prior to production. By vetting the tax requirements beforehand, foreign actors, for instance, will know how much tax they will pay.

In the old tax system, RevCan was concerned that while non-resident film workers paid the 15% withholding tax, they mostly failed to pay whatever other tax bills were outstanding. The Film Service Tax Unit will ensure compliance with the tax laws, says Dhaliwal, and the actual cost of the new tax regime to the non-resident workers is not expected to increase their tax liability.

Dhaliwal has also formed the Film Industry Advisory Committee, to begin operating in September, which will allow members of the film sector to meet with the Ministry of National Revenue on a regular basis. And in January, an intergovernmental working group from the ministries of Finance, National Revenue and Heritage will be set up to streamline the federal film policy, including the Canadian Film or Video Production Tax Credit.

Toronto producer Patrick Whitley, who cochaired the industry working group negotiating with government on the issue, says: ‘Film is a major growth industry in Canada and its significance was taken seriously by Revenue Canada.’

The cftpa, the Canadian Motion Picture Distributors Association, the Motion Picture Association of America and u.s. studios such as Disney, Warner Bros., Universal and Paramount participated in the tax talks.