It may labour under the term ‘tax credit’, but Canada’s Film or Video Production Tax Credit is anything but. In fact, this clunking rebate is closer to a grind.
“The federal tax credit is laughable.” So says Arnie Gelbart, founder and president of Galafilm, the Montreal production company which has produced features such as Thom Fitzgerald’s The Hanging Garden and Lea Poole’s The Blue Butterfly as well as some landmark Canadian TV documentary series.
Gelbart is referring to the Canadian Film or Video Production Tax Credit (CPTC), the labour-based tax credit that is the foundation of Canada’s indigenous film and television production stimulus system.
“Don’t call it a tax credit. Call it something else - a rebate, a voucher”
To be clear: as opposed to an equity investment from a cultural agency such as Telefilm Canada, this is grease for the industry as an industry. The purpose of the CPTC is to stimulate production of films made by Canadians for Canadians. It generates jobs and it generates tax dollars.
The particular cause of Gelbart’s ire are three words familiar to any Canadian producer. You’ll fi nd them in the description of the CPTC on the website of the Canadian Audio Visual Certifi cation Offi ce (CAVCO), the agency which administers federal tax credits and determines the ‘Canadian-ness’ of a production — the latter being a fair but Byzantine calculation. The three words are: “net of assistance”.
Canadian producers have one word for it: grind. Federal income tax rules grind down the CPTCeligible portion of a production by the amount of public-sector assistance received from other sources, regardless of provenance.
Thus as provinces have boosted their production tax credits for producers in their respective territories, the federal contribution to those productions has essentially contracted.
The CPTC’s 25% labour-based tax credit is still a 25% tax credit so the federal government can be seen to be a stalwart supporter of the industry. -But the devil is in those three words.
Consider the financialstructure of a Canadian content feature film produced in Quebec: Telefilm might contribute 40% of the equity and its Quebec counterpart Sodec might provide another 20% and the Quebec tax credit might contribute a further 17.5% for a total of 77.5%. But only the labour portion of the remaining 22.5% is eligible for the CPTC.
On Gelbart’s latest production, a thriller entitled The Kate Logan Affair (still pictured), the CPTC amounted to 1.96% of the $2.4m (C$2.6m) budget. Not very stimulating.
Of course, the Canada Revenue Agency sees it another way. It exists to collect tax and every cent that comes into the treasury is meant to stay there.
It’s not a question of politics: Liberal and Conservative governments come and go but the grind is implacable. It is no doubt a function of the culture of accountancy. The thinking goes like this: a tax credit should only be given in respect of costs that have been incurred by the tax payer claiming the credit.
So then don’t call it a tax credit. Call it something else: a rebate, a voucher. The issue is this: eliminating the grind would stimulate production, which is after all the ultimate goal of the tax credit.
This summer, the Canadian Film and Television Producers Association (CFTPA) submitted the suggestion that the federal government enhance the CPTC from 25% to 35% and the Production Services Tax Credit from 16% to 26%, eliminate the grind and move from a labour base to a production cost base, as Quebec and Ontario did with their service production tax credits.
Film and television production is a proven investment. The province of Alberta reports a return of investment of $5.60-$9.30 (C$6-C$10) for every Canadian dollar invested in the Albert Film Development Program. Ontario says it sees more than that.
There’s nothing to stop the Canadian government from reaping similar returns. Except bureaucratic thinking.