Vancouver: Ontario and b.c. lobbyists are heralding Revenue Canada’s extension of the limited partnership tax shelter to Oct. 31 as a victory and anticipating the design of a new tax credit program proposed by RevCan and the Ministry of Finance.

In b.c., where the fate of the tax shelter’s original July 31 deadline created the most dramatic effect, leaving only one foreign mow on the recent film production list versus 44 mows produced (33 of which qualified as limited partnerships) in the first half of the year, the extension is a welcome relief.

B.C. Film Commissioner Pete Mitchell predicts volumes will soon reach their busy pace from the first six months of the year. He’s also encouraged by the promised tax credit.

‘The tax credit is a positive move that will benefit b.c.,’ says Mitchell. ‘It will definitely stimulate production. The Ministry of Finance has responded well to what is primarily a b.c. issue because of our dependence on foreign production. It’s rare for Ontario and b.c. to stand firmly together on a single issue and that’s why they listened.’

His only concern is the design and implementation of a tax credit to take effect when the shelter is put to rest. ‘Ninety days isn’t a long time,’ he observes.

Ed Short, a tax policy officer with Finance’s tax legislation division, says program details should be worked out before the end of October. He says industry is not likely to support a selective aid approach or the establishment of a new administrative bureaucracy.

In response to recent industry lobby efforts, Short says government is aware of the competitive nature of the international location business. He says a new program could resemble an r&d-style tax credit. The proposed program will apply to eligible Canadian labor expenses incurred after October 1997.

In the meantime, government says it will consult with the industry to determine the most effective incentive within certain parameters, including that the incentive must be delivered directly to the production services provider, it must be based on the Canadian labor component of the film or video production, and it must not be a tax shelter mechanism.

Montreal producer Tom Berry, cftpa government relations committee chair, says the outcome of talks leading to a new regime is likely to be competitive with the 8% to 8.25% benefit currently paid out to foreign producers. Berry says it seems logical the benefit be paid to a Canadian producer/service provider in the form of a tax credit. While Canadian investors will lose a tax deferral, Berry says many of the same players currently brokering production services will remain active.

Others are less enthusiastic in embracing the tax credit scheme, questioning its political viability.

Under the current tax shelter program, the government retrieves its investment from foreign producers over a five-year period. Under the tax credit, there will be a line item of the government’s expense sheet that tallies how much tax money was rebated to non-Canadian producers. Fiscal conservatives in the house may not look kindly on lump payments to non-Canadians.

Other industry execs care less about what financial instrument exists than they do about a stable, protected program that is free from political tampering.

‘A tax credit production services deal should create stability for foreign producers and not be susceptive to political adjustments every budget,’ says entertainment lawyer Arthur Evrensel, a partner of the Vancouver office of Heenan Blaikie. ‘[A tax credit] has the potential to become a political hot potato and we can’t afford to lobby government every year to maintain what we have. We’re looking for stability from government to allow for long-term planning. I’d rather have something that government will commit to and leave alone for five years.’

With files from Leo Rice-Barker.