Broadcasters and producers are asking a pre-budget parliamentary committee to recommend the full restoration of government funding to the Canadian Television Fund to the former $100-million level. At the same time, both the CFTPA and the APFTQ producer associations are urging the Standing Committee on Finance to support long-sought-after changes to the Canadian Film or Video Production Tax Credit Program.

CAB president and CEO Glenn O’Farrell told the Finance committee the industry needs a multiyear plan and stability in funding.

‘We need to match demands for Canadian programming as established by the CRTC conditions of licence on broadcasters with supply in terms of a funding model based on reality,’ says O’Farrell, who has proposed an industry-government summit to establish goals and a realistic way to achieve those goals.

O’Farrell points out that ‘[Paul] Martin has said, on the record, and very publicly, that he would reinstate the $100-million [CTF] contribution. That’s a good thing and we hope that statement is followed up. But why can’t we have a longer term plan?’

The ’03 budget renewed CTF funding for two years but reduced the annual contribution by $25 million. And because $12.5 million has been advanced from the ’04/05 budget to alleviate this year’s funding shortfall, the industry is now looking at a government contribution of only $62.5 million for the next fiscal year. A new budget is expected in February.

Guy Mayson, acting president and CEO of the CFTPA, says recent meetings between the CFTPA, APFTQ and officials from the departments of Finance and Canadian Heritage have led to an agreement on the need for changes to the refundable production tax-credit program.

The issue has reached a sensitive stage and producers are counting on the government to deliver on a promise to simplify and streamline the content tax credit made in the 2000 budget, and repeated in the ’03 budget.

‘We feel we are getting close. And the positive sign is that there is a high degree of consensus on resolving this,’ says Mayson.

Mayson says the biggest problem with the credit program is ‘the complexity of the design, and [issues] of double calculation and the effect of [public] equity and assistance grind.’

Nathalie Leduc, director, financing sector, says the APFTQ presentation to the Finance committee underlined the positive role of the CTF and tax-credit program in creating a $5.1-billion-a-year Canadian industry and 53,000 fulltime jobs.

APFTQ also raised the issue of equity between the content and production service tax-credit programs, pointing out the ’03 federal budget increased the service tax credit to 16% from 11%.

The changes under review by Finance would simplify the tax-credit regime, but within the framework of a generally ‘revenue-neutral’ approach. Producers are hoping the modifications will reduce the negative impact of equity investments on the tax-credit calculation. Producers would also like to see certain productions with significant public equity gain approximately two percentage points – in terms of the program’s net benefit to producers.

Federal tax expenditures – the cost to government of the production tax-credit program – was $160 million in 2002 and is estimated to be $170 million in 2003.

Improved turnaround

In terms of processing tax-credit claims, CAVCO director Robert Soucy says the turnaround time for certificates has been reduced by much as 65% in the recent past, from an average of six months to about 10 weeks.

The major ‘simplification’ elements on the table at the recent meetings with Finance and Heritage include changes to the investor rule, ownership requirements in the Income Tax Act and Income Regulations, the 48% production cost cap, the notion of a cap on producer fees, and the treatment or calculation of government assistance (in the form of grants and the provincial tax credits) and government equity (such as equity investments by Telefilm Canada).

The sought-after change in the investor rule would sort out double-claim issues, which are seen as interpretative impediments having the effect of discounting advances or presales from broadcasters or distributors, while maintaining the restriction against certain ‘sheltering’ practices.

Changes to investor and ownership rules would place additional burden on producers to demonstrate they are the real beneficiaries, in terms of commercial exploitation, of a production’s copyright.

The content tax credit is capped at 25% of eligible labor costs to a maximum of 48% of the total cost of production costs, less all forms of public assistance – in theory a maximum of 12% of a production’s cost or budget.

Leduc says the APFTQ suggested that Finance increase the 48% cap on total production costs to 65%, especially for the more intense TV production sector.

Public assistance ‘grinds down’ the cost of production, and equity reduces both the cost of production, and proportionally, the eligible labor costs claimed by the producer.

More information on the pre-budget hearings of the Standing Committee on Finance is posted at: www.parl.gc.ca/InfoComDoc/37/2/FINA/Meetings/Evidence/FINAin-E.htm