Why a new flat tax?

Simple. The lucrative American industry and its high-priced marquee talent will go somewhere like Britain or Australia if the Canadian government pushes for full tax compliance. u.s. studios and networks will literally cross an ocean to avoid production uncertainty and the costs of insuring a $20-million actor against increased Canadian tax are impossible, by all accounts, to tabulate. So if they all voted with their feet, the u.s. studios and networks would take with them more than $1 billion in annual spending and the jobs for thousands of Canadians.

And on a micro level that means a loss to people like David McLean, owner of the massive Vancouver Film Studios (built to cater to the u.s. industry) and friend to and fundraiser for Prime Minister Jean Chretien. It’s widely known that during the pm’s campaign visit to Vancouver, hosted at Vancouver Film Studios, McLean broached the subject of the foreign actor tax with Chretien.

At the same time, the u.s. industry understands there needs to be a political win for Canadian tax authorities. A withholding tax of 19% or 20% makes the system more equitable from the government’s perspective and falls under the 20% foreign tax credit allowed in California.

At the same time, argues a group like the Motion Picture Production Industry of Canada, marquee actors working on Canadian shoots are not resident here and they don’t benefit from paying into federal health insurance. *