Tax Change Threatens Hollywood Production in British Columbia

TORONTO - Another eastwards shift of Hollywood film and TV production in Canada is expected after British Columbia voted in a referendum to phase out its harmonized sales tax (HST).

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Foreign producers can now recover the former 8% provincial sales tax (PST) as part of the HST.

But a majority of British Columbians voted to scrap the controversial HST, of which such productions as TV series Fringe and Matt Damon film Elysium have taken advantage, and return to the former PST, which is not recoverable by foreign producers shooting locally.

The HST, coupled with provincial and federal tax credits, allowed Hollywood producers that shoot in Canada to enjoy significant cost savings, even with the high loonie compared to the American dollar.

British Columbia phasing out the HST over the next 18 months is now expected to benefit Ontario, which is keeping its HST.

Hollywood North in recent years has been largely centered on British Columbia and Ontario, with tax policy helping to determine where the major studios shoot north of the border.

U.S. foreign location shooting rebounded in Ontario last year after the province introduced an all-spend 25 percent film tax credit.

That followed the British Columbia provincial government responding by raising the value its foreign film tax credit, but keeping the incentive based on labor costs only.

British Columbia managed to retain much of its Hollywood production activity due to its proximity to Los Angeles, but that appeal for the major studios may partially subside after the province turfs its HST in 18 months.