Canadian film representatives, at press time, were set to descend on the federal Ministry of Finance in Ottawa for a series of meetings pitching the ‘urgent’ need for expanded tax incentives to preserve jobs and investment.

David McLean, owner of Vancouver Film Studios, members of the Directors Guild of Canada and the CFTPA each booked meetings between Dec. 12 and Dec. 18 to discuss strategies to repair dwindling service production volumes in Canada.

Across the country, unions, producers and suppliers are complaining of up to 50% unemployment or service reductions, in part, due to what they call an uncompetitive tax-incentive program that fails to lure lucrative U.S. productions. Canada’s tax-shelter program, which flowed expenditures from film production to private investors, was eliminated in April, and the six-year-old production services tax credit is not returning enough to bigger-budget productions.

Volumes in B.C., for instance, are so low that, in December, veteran production managers Fitch Cady, Grace Gilroy, George Chapman and Warren Carr – each capable of mustering work for 200 people on a shoot – were ‘between pictures.’ Previously, they struggled for vacation time.

‘We’re asking for assistance to become competitive,’ says Chapman, a delegate for the DGC.

That reduced productivity, estimates Chapman, means a loss to the provincial and federal governments of up to $4.5 billion across the country, $1.5 billion in B.C. alone.

‘We can get jobs,’ he says. ‘We can move to Australia.’

Guy Mayson, executive VP at the CFTPA, says his association often meets with the Finance Ministry and has been chasing the tax-credit issue for more than a year. ‘Clearly, there is urgency,’ he says. ‘Production is suffering. We need some movement from the government willing to address this.’

According to Mayson, analysis shows that, for larger-budget productions and their more complex budgets, the 11% labor-focused production services tax credit returns only 2% to 3% of a total budget, rather than the 5% to 6% the credit was designed to generate back in 1997. Put in simplest terms, this is because as overall budgets grow, the labor portion becomes less significant. The old tax shelters compensated for the lower rate of return, Mayson adds.

Improving the effective rate of the credit means broadening the base of eligible expenses (like expanding it to Canadian expenditures from just labor) or raising the rate from 11% of labor costs.

The change in finance ministers from Paul Martin to John Manley may have slowed the implementation of the tax-credit proposals. There is also speculation that Finance is concerned about the anti-Canada runaway production lobby in the U.S. and unwanted attention from the U.S. Department of Commerce.

Whatever the reason, the delay has been frustrating, says Mayson.

‘We’re very hopeful,’ he says. ‘There is a very good chance for something in the new year.’

In preparation for next year’s federal budget, Finance has been holding consultation meetings over the past couple of months, says ministry spokesperson Harry Adams.

‘I can’t comment on how the government will react [to the production industry’s lobby efforts],’ says Adams, ‘but we are happy to listen if there is more to consider.’

Tax shelters are not government policy and were loopholes that needed to be closed, he says. The change, he adds, was not meant to be punitive to the film industry and he points to the domestic and foreign production services tax credits as effective incentives to producers.

‘The economic evidence is not cut and dried,’ says Adams, referring to the loss of jobs and production volumes. ‘There are a variety of factors affecting the ebb and flow of any industry. Competitiveness is an issue we are interested in.’ *