Film Tax Credit Chill Spreads To Canada

New Brunswick is first Canadian province to rethink its film production tax breaks.

TORONTO – Cue the schadenfreude: U.S. film tax credit instability has spread to Canada.

A cash-strapped New Brunswick is phasing out its 40 percent film tax credit, leaving local producers warning their industry faces a talent exodus.

There will be more than 30 companies here that will be affected. Most will be forced to move to other provinces that support media and they will bring their productions with them,” Maurice Aubin, president of Media NB and director of Mozus Productions said.

Canadian provinces like British Columbia, Ontario and Quebec in the last two years have managed to woo Los Angeles producers by juicing their film tax credits as debt-laden U.S. states like New York, Michigan and New Jersey either reduce or scrap their Hollywood tax breaks. 

But Canadian provinces are not immune to pressures to ditch film tax credits to pay for costly government programs.

“The 40 percent tax credit made the province (New Brunswick) competitive with other jurisdictions in Canada. But with the phasing out of these tax credits, the local industry will be at a severe disadvantage now,” Tony Merzetti, executive director of the Fredericton-based New Brunswick Filmmakers' Co-operative, representing 250 members province-wide, said in the wake of New Brunswick rethinking its film tax breaks.

New Brunswick’s film tax credit cost the province $4.4 million in 2008-09, and $3.3 million in 2009-10.

The Atlantic province has paid out $2.7 million to film and TV producers in the current fiscal year, and aims to phase the production tax break out in 2011-2012.

Film and TV production activity is far higher in British Columbia and Ontario, the country’s biggest shooting locations depending on Hollywood tax breaks as their lifeblood.

U.S. foreign location shooting rebounded in Ontario last year due to that province introducing an all-spend 25 percent 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.

The result is British Columbia’s just-over $1 billion in total production spend last year just kept it ahead of Ontario, where that province's production sector clocked up $964.3 million in overall activity in 2010, up from a year-earlier $946.4 million and $671.2 million spent locally in 2008 when Hollywood studios pulled back amid the 2008-09 market meltdown.