Ontario will still be Hollywood North after tax credit cuts

By Iman Sheikh - Published on May 28, 2015
Ontario has unveiled plans to reduce the rebate given for foreign and domestic film production. (Photo: ricardodiaz11/flickr.com)

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For fans of the television series Hannibal, walking around Toronto’s East Annex neighborhood can be a surreal experience.

While the series is set in the U.S., an exterior shot of the title character’s Baltimore mansion is actually a home on Lowther Ave. in Toronto. The cult show is filmed entirely in Ontario, with locations ranging from a downtown YMCA, to Guelph’s Rockwood conservation area, to Scarborough Bluffs.

Locals are used to the blending of cityscape and film set; Ontario is known as Hollywood North after all, and hosts production crews for everything from television favourites such as the legal drama Suits, to potential blockbuster movies such as Suicide Squad. But will all that change once new legislation passes and it is no longer economical for film crews to shoot here?

In April, the provincial budget unveiled plans to reduce the rebate given to foreign and domestic filmmakers shooting productions in Ontario. The Ontario Production Services Tax Credit (OPSTC) will drop from 25 to 21.5 per cent, while the Ontario Computer Animation and Special Effects Tax Credit (OCASE) will fall from 20 to 18 per cent, affecting those contracted for visual effects on-set and in post-production.

The decision resulted in a backlash. ACTRA Toronto President David Sparrow told Business News Network (BNN) that he was “deeply concerned about the impact of these cuts on foreign productions currently shooting or planning to shoot in Ontario.” Peter Lyman of Nordicity, a consulting firm specializing in economic analysis of the creative sector, stressed that consistency in the tax credit system was vital to continued growth in the sector, where foreign production rose 4.9 per cent to $86 million between 2013 and 2014.

But while the new credit rate was scheduled to start after April 23, 2015, the government backed off these measures after hearing “valuable feedback from the film and television sector on the need for stable and reliable support.” Culture minister Michael Coteau announced an amendment to the budget bill on May 25 that provided a "transition period to ensure that producers who made a significant commitment to Ontario before the introduction of the budget would receive the tax credit rates they expected." He went on to state the entertainment and creative sector supports over 206,000 jobs and contributes $12.4B to the provincial economy.

So why propose tax credit cuts in the first place?

The province doesn’t gain much by offering them, according to a 2011 study that’s rarely discussed. Ontario’s Ministry of Finance advised if Ontario eliminated the 25 per cent tax credit for foreign and non-certified domestic productions, it would save $155 million per year, while the impact on the economy would be negligible.

Tax credits are only part of the story when deciding where to locate, says tech researcher and University of Ottawa professor Michael Geist. “Talent is a big factor and currency value is a big factor,” he says in an interview.

Today’s currency conditions already make Ontario an attractive filmmaking venue. The Canadian dollar currently trades at approximately 80 cents U.S. and analysts predict this figure will fall even lower over the next 12 months due to a slump in Canadian oil prices.

Ontario’s tax credits are intended to encourage private investment, but instead government subsidies finance a large portion of film and television production, as Geist writes in his weekly technology law column in the Toronto Star: approximately 60 per cent of all Ontario-based film and television production spending in 2010 was subsidized through credits, grants and other public funding.

Geist points out that the sector is becoming “more dependent on government support. In 1998, film tax credit expenditures constituted six per cent of production costs. Ten years later, there were fewer productions in Ontario, but the film tax credit expenditures were responsible for 30 per cent of the costs.”

“We should be clear at the end of the day that in Canada public dollars fund the majority of costs associated with most productions,” Geist says. “Whether we’re talking about federal tax credits or provincial tax credits or a myriad of grants, the public pays a very significant portion of the costs associated with film and television productions.”

As Geist writes, while decreased production activity in Ontario could potentially lead to a decrease in jobs available in the film sector, “the Ontario government study found that film sector wages were below the provincial average and that many of those jobs were temporary, project-based ones.”

Tax rebate cuts will also not affect revenues generated for the province by the Toronto International Film Festival (TIFF). While the thriving and rapidly expanding film industry played a large part in making Toronto a destination for industry honchos — TIFF brings the province an estimated $198 million annually — the festival is more about finished films finding distributors and making deals rather than shooting and production.

The grumblings of studio heads, according to Geist, is not something taxpayers should be concerned about. “There’s going to be backlash anytime you have an industry that’s been reliant on taxpayer funding and finds that some of that funding is lost.”

This article has been updated with additional attribution.

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