Made in Canada

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Canada likes to paint its film tax credits as stable and predictable -- certainly when compared with the U.S.

But a closer look at the tax credits offered by its provinces reveals the same game of incremental one-upmanship that has become standard in the U.S. And, while that's a mixed blessing north of the border, it might herald even sweeter giveaways for Hollywood studios seeking to film here.

Quebec got the ball rolling in mid-June. That's when the province extended its tax credit, allowing producers to get a 25% break not only on labor costs (as had been the case previously) but also on all production expenses.

Filmmakers and government officials based in Vancouver, the heart of movie-making in rival British Columbia were worried, but despite that the province did not raise its own tax breaks to challenge Quebec's.

"British Columbia put on a flashing yellow light indicating this is a concern," says Shawn Williamson, a principal at British Columbia-based Brightlight Pictures, a major Canadian indie producer. But the response they got was "We don't compete with Montreal (Quebec's largest city)."

However, when another province, Ontario, took on Quebec and juiced its 25% tax credit to cover all local spending, alarm bells rang out all over British Columbia.

"We were shocked that Ontario matched," Williamson says. Even if the province does not see itself as competing with Quebec, "We absolutely compete with Toronto (Ontario)."

"We're concerned about our competitiveness," B.C. film commissioner Susan Croome acknowledges. Still, the province has yet to raise its tax credits.

B.C. and Ontario -- and their respective filmmaking centers, Vancouver and Toronto -- have long been fierce rivals, routinely battling for the same Hollywood film and TV shoots. But British Columbia has often won out over Ontario because of its time zone, proximity to Los Angeles and ample local crews and studio space.

Now those days may be over, as projects are flocking away from them in search of a better deal.

"Everyone has been wanting to see us," says Hans Fraikin, film commissioner with the Quebec Film and Television Council, which promotes the province in Hollywood. "There's phone calls, letters, producers scouting and sending scripts in."

Hollywood indie and studio producers are also circling Toronto as they eye a better tax incentive than the one available in British Columbia -- better both in terms of its dollar value and the percentage of a budget it encompasses.

"Those productions scouting now will take time to land in Ontario," says Kristine Murphy, director of industry development at the Ontario Media Development Corp., which administers Ontario's tax credit program.

Jim Mirkopolous, vp facility management for Cinespace Film Studios in Toronto, has already booked "Resident Evil 4," a project that scouted Michigan and Quebec before settling on Ontario in the wake of its improved tax credit.

"This puts us right up front with Louisiana and New Mexico and all the other states that broadened their tax credit to an all-spend," says Paul Bronfman, owner of the Comweb Group, a film equipment supplier, and chairman of Pinewood Toronto Studios.

Williamson says his company, Brightlight, will now be forced to open a Toronto office to service American producers and notes that Brighlight is partnering on an $11 million U.S. feature for Fox that was meant to shoot in Vancouver, but shifted production to Toronto. He adds that the feature stands to see its tax break grow from $950,000 (the amount available in B.C.) to $1.7 million.

"When Ontario can add $1 million to your film, it's a no-brainer," he says. "You shoot in Ontario."

The move came after B.C.'s minister of tourism, culture and the arts, Kevin Krueger, told a Fox executive that his fiscally responsible province would not match Ontario and Quebec.

As a result, other B.C. loyalists are also considering answering the siren call from eastern Canada.

"We may have to relocate until B.C. gets its act together," says Jamie Goehring, head of business development for Straight Line Films, a Vancouver-based provider of production services for local U.S. shoots.

Tax credits aside, the past few years have been troubling for a country that pioneered these financial incentives back in the 1990s.

This has been the inevitable result of states rolling out their own tax credits and luring Hollywood cameras back across the 49th parallel. Currency fluctuations have also impacted Canada, as has the falling value of the U.S. dollar. While a yo-yoing loonie in the CAN$0.80-CAN$0.90 range during the past year has fueled a modest rebound, the 65-cent Canadian dollar is a thing of the past.

But as Canadian provinces have lost U.S. location shoots, they have done more than hike tax breaks.

Provincial governments are pouring money into new animation and video game studios as they look to increase high-tech digital jobs. British Columbia got the ball rolling when Disney's Pixar announced it would open a new studio in Vancouver in the fall. Pixar's move north was accompanied by lucrative tax credits and other financial incentives from the B.C. government for digital animation and R&D.

Over in Ontario, Toronto then acquired a 20% stake in the city's Filmport Studios complex to make way for Britain's Pinewood Studios Group to take control of the mega-studio, newly renamed Pinewood Toronto Studios. The Ontario government subsequently agreed to invest $20.5 million in the Starz Animation Toronto 3D cartoon studio during the next five years, to create and retain high-tech jobs locally. And Ontario then convinced French interactive game maker Ubisoft to open its fourth Canadian development studio in Toronto by pitching in $226 million over 10 years to create 800 jobs.

For local studio operators and post facilities, Ontario's sweetened tax credit to lure business promises better times ahead.

"There's no doubt that Toronto facilities will have a higher demand," says John Weber, president and CEO of Peace Arch Studios. "The town as a whole will be busier as a result of the tax credits."

Dan McLellan, executive vp and GM of Deluxe Toronto, welcomes a revival of foreign production. "The market here in Toronto is going through it's most difficult year ever for service work," he says. "We need (American production)."
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