Canada at war over tax incentives

Media centers outdoing each other to lure Hollywood

There’s a war going on in Canada — over entertainment tax incentives. Just as in the U.S., where numerous states are leapfrogging each other’s tax breaks in order to pull in film and television productions, a high-stakes bidding battle has recently erupted north of the border.

Canada’s three big media centers — Toronto, Montreal and Vancouver — are vying with one another to attract lucrative Stateside productions.

As a result, they’ve become locked in a fight that pits the three cities and their provincial governments — Ontario, Quebec and British Columbia, respectively — in a struggle for film and TV projects at a time when there are fewer shows to go around. Reasons include rising competition from U.S. states with their own lavish incentive programs, the credit crunch that has made it harder to get production financing, and a steady upward trajectory for the Canadian dollar against the greenback that has pushed up the cost of going north.

Quebec, suffering from an extended production drought, escalated first. In early June, its government stunned the competition by nearly doubling the value of its already generous production incentives.

Quebec’s 25% refundable tax credit hasn’t gone up, but the rebate now covers the entire budget of a project, based on expenditures in the province. And to lure high-cost features, there is no longer a budget ceiling. Formerly, the 25% applied only to spending for local crew and labor, ordinarily representing about half the cost of a shoot. Based on the changes, Quebec claims its new incentives package provides credits that can top 40%.

Not to be outdone, neighboring Ontario quickly followed suit, precisely matching Quebec’s hikes. Though Ontario’s legislature hasn’t yet approved the increase, predictions are that it will easily pass.

“Tax credits are the new currency in Hollywood, so it is important for Ontario to remain ays Karen Thorne-Stone, head of the Ontario Media Development Corp. “We saw an almost instant increase in interest from Los Angeles, and we are currently very busy scouting a number of new productions for the upcoming fall and winter.”

Caught in the crosshairs of the eastern provinces is British Columbia, which has yet to respond. Home of “Hollywood North” — as the city of Vancouver styles itself, because it is by far the biggest production center in Canada for Los Angeles-originated shoots — B.C. is pondering how much it will need to ante up to stay competitive.

“There’s no plan yet to match the Ontario tax credits, but there are ongoing talks between the industry and the government over what can be done” says British Columbia film commissioner Susan Croome. “We remain a fantastic option and a quality proposition,” she adds, referring to the province’s proximity to L.A., a shared West Coast time zone, a temperate climate that permits year-round shooting, and variety of unique locations that the eastern provinces can’t match. But she also cites concerns that B.C.’s appeal “has been eroded.”

While it waits, British Columbia is already firing shots across the bows of its rivals. “Ontario’s increase comes close to doubling the B.C. tax credit,” declares Shawn Williamson, co-head of Vancouver’s Brightlight Pictures. “That makes it too big to ignore.” He says his company has already lost out on three independent features budgeted at between $10 million and $15 million because they shifted east.

Thus Brightlight, though it will continue to be headquartered in B.C., has registered as an Ontario company and shipped half of its staff to Toronto. “People still want to shoot in Vancouver,” he notes, but warns that if the B.C. government doesn’t make its incentives more competitive, “the result will be to absolutely shift the production landscape away from B.C. over the long run.”

Says Peter Leitch, chairman of the B.C. Motion Picture Production Industry Assn. and prexy of Vancouver’s North Shore and Mammoth studios: “The bottom line is that tax credits are what our customers are looking at these days, because it’s become so much harder to make money.” Leitch and other industry leaders have met with B.C. culture minister Kevin Krueger, but have so far gotten no commitments.

Leitch says the present showdown over incentives may be the biggest challenge B.C. has faced in the last 25 years. “We’re very optimistic that the government, which has been very supportive of this industry, is not just going to let production slip away to Ontario.”

Not everyone sees British Columbia playing defense. “There are already better rebates available in other provinces, but Vancouver is packed with network production, and other provinces aren’t,” says Steve Pearlman, executive producer for “V,” a series about an alien invasion set to air on ABC this fall that recently started shooting in Vancouver.

“I don’t think Montreal and Toronto can compete because of their distance from Los Angeles, their weather and their remoteness,” asserts Pearlman, who has more than 10 years’ experience in supervising film and TV productions in Canada. “The advantage of being able to hop on a plane and be home in Los Angeles in two hours is really a big deal,” he declares. “I would not have taken this job if it were on the East Coast.”

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