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Can B.C. really call Ontario's film tax credits unsustainable?

As B.C. digests yet more evidence that it is hemorrhaging film and TV jobs because of Ontario's more generous tax credits, Cultural Development Minister Bill Bennett is sticking to his guns that what Ontario is doing is "not sustainable."

The Canadian Media Production Association released a report last month that shows B.C. lost 3,500 jobs from 2011 to 2012, while Ontario gained 7,900. Industry insiders estimate business has dropped 40 per cent in B.C. in the past year alone.

Ontario and Quebec offer Hollywood studios 25 per cent discounts on their total local expenditures, while B.C. offers a 33 per cent rebate on local labour costs only.

"Given one of this government's key commitments was a balanced budget, and recognizing Ontario is running deficits in the billions of dollars, we believe that level of tax credits is simply not affordable or sustainable for this province," the Minister told Metro Friday in an email.

But what exactly does the term “sustainable” mean when used to describe a tax credit?

Economic analyst Aaron Murray, who authored an economic impact study last year for the Saskatchewan film commission and Chamber of Commerce, explained:

“A tax credit is supposed to be, basically, recouping the investment, so if you have an $8-million tax credit fund, that tax credit-related activity should create enough taxes back to the provincial government to cover that off.”

But there’s a crucial caveat, he noted:

“If that math hasn’t been done you really can’t tell.”

Interprovincial competition and bureaucratic wrangling over what a return on investment actually means have so far kept B.C. and Ontario from comparing notes on the net costs of their respective tax schemes.

For what it’s worth, Murray’s report found that after spending $7.8 million annually on tax credits for an industry that employed 850 people before its scheme was cancelled last year, Saskatchewan was able to recoup $6.5 million in taxes, so its net spend was $1.3 million per year.

Operating at some sort of net loss, in order to keep and generate creative jobs and diversify economies, is the norm in most North American states and provinces with film tax credits, he added.

B.C.’s industry is worth $1.2 billion and employs 25,000 people, at a projected cost of $330 million in tax credits this year — but how much of that will come back to the government, apparently no one can say.

An economic impact study commissioned by the province in 2010 was never released because of internal conflicts over methodology, and a report commissioned by industry last year is not due out until around summer.

On Friday, Ontario announced with great fanfare that its film and television activity contributed $1.28 billion to the provincial economy in 2012, and accounted for almost 29,000 full-time direct and indirect jobs — the industry’s strongest results ever.

The province expects to spend $223 million on film and television tax credits in the coming fiscal year, but it is not clear how much of that will be recovered. Repeated calls and emails to the Ontario Ministry of Finance, Ministry of Culture, and the Ontario Media Development Corporation asking whether an economic impact study has been done were not returned.

A request to the B.C. Minister’s office asking if he had seen any numbers indicating Ontario’s tax credit scheme is operating at a loss was also not addressed.

B.C. NDP Culture Critic Spencer Chandra Herbert said he has made similar requests to the Liberal government for years, and can only conclude that the government does not have the data to back up its claims.

“The Liberals may say it’s unsustainable but unless they’ve done their own report, why should anybody believe them?” he said.

“I don’t know. Is it unsustainable? Well, the Ontario government doesn’t seem to think so, despite the big deficit that they have… so if you’re going to make that suggestion that it’s unsustainable I would think that the provincial government would have actually done some work to look at why.”

Bennett says it would cost B.C. another $100 million a year to match Ontario and Quebec’s tax incentives, but without any studies to show how much tax revenue it would gain back, that figure only tells part of the story.

Besides, B.C. unions aren’t asking B.C. to match the eastern provinces — they are only suggesting it go about halfway, closing the gap of the average project’s total tax discount from about 12 per cent between the provinces to five per cent.

With the May provincial election coming up, all eyes are on the NDP to see whether their platform will offer some sort of compromise.

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