Heritage Canada is considering reducing instead of scrapping the federal production services tax credit, a source close to the Feature Film Policy Review says.

Although the only options in play to date have been scrapping the credit and redistributing the estimated $55 million that goes to foreign and domestic service producers into domestic film production or maintaining its current incarnation and appeasing American producers, another blueprint in discussion is reducing the fstc by as much as one-third.

According to the source, an internal study shows that the lesser credit would have a ‘minimal’ impact on the amount of service production in Canada, mainly because the primary incentive to come north is the value of the dollar.

In an informal survey of American producers, the consensus is that an $0.80 Canadian dollar will send foreign production across the border, tax credit or no tax credit. Until then, the degree of incentive the foreign tax credit inspires – as is, lesser or rescinded – depends on the specifics of individual projects.

Chris Morgan, producer of the Disney mow Genius, says as long as the dollar remains in the $0.65 range, he’ll continue grounding his shoots in Canada, even with the loss of an 11% labor rebate. But if the dollar reaches the $0.80 range, the cost of transporting crew and cast, housing talent and per diems, etc. becomes an issue.

Similarly, Brent O’Connor, production manager of the Sylvester Stalone vehicle Detox shooting in Vancouver, says that if the Loonie climbs to $0.70, bells will go off, particularly since Toronto and Vancouver now have wage rates higher than some American cities.

‘But right now, the foreign services tax credit is the final nail in the coffin of American labor unions,’ says O’Connor. ‘There’s no way they can compete with a 65-cent dollar plus 22% of that coming back.’

Since the credit is based on labor, a rescinded or reduced credit may inhibit productions with heavy start-up costs related to construction and set-building which require the hiring of large work crews, he says.

Blake, Cassels & Graydon entertainment lawyer Gavin Wise says that based on his conversations with American clients, big companies producing high volume in Canada already have the sets, machinery and infrastructure set up to handle production and will stay whether the fstc is completely rescinded or not.

‘But my fear is that if the tax credit goes, combined with the actor withholding tax issue, then if labor problems pop up like in Vancouver previously and the dollar goes up. . . I worry we’ll die the death of a thousand cuts.’

Disproportionately affected by a lesser or rescinded credit could be smaller producers who are making decisions on a per project basis, he adds.

Amy Kaufman, producer of Paul Schrader’s Forever Mine (Joseph Fiennes, Gretchen Mol), an independent film shooting in Toronto, says she is using the tax credit to help finance the project. The film’s budget is roughly $15 million and the fstc and Ontario credit combined is expected to account for $350,000 to $450,000 of the budget. Smaller producers also use the credit as an incentive for financiers to provide greater gap financing, she adds.