Tax credits boost B.C.
Revenues expected to beat $850 mil again
The tax credits have attracted an additional 15% in production spending worth C$192 million ($163.2 million), according to a study commissioned by the government. With the big studios here booked all summer, and "X-3," the latest in the high-budget "X-Men" series, now under way, production revenues are expected to surpass $850 million mark again this year.
About 80% of all production revenue in B.C. was foreign-sourced in 2003-04, compared with just 19% in Ontario and 16% in Quebec.
While the generous tax credits are helping the B.C. industry recover from a slump, the provincial government's coffers are taking a big hit.
The higher tax credits have accounted for an increase of $17 million in tax revenues, but that's more than offset by the cost to the government of $38.25 million in forgone tax income from producers, according to the study by Intervistas Consulting for the B.C. Ministry of Economic Development.
The study will be used in assessing the value of the tax credits to the industry and the province. The increase was demanded by the British Columbia production industry to meet an increase in tax credits by rival Ontario, but it drew considerable criticism from many in B.C. even before it was announced.
The study suggests that if production spending in B.C. does not decline by more than 53%, the provincial government will achieve a net revenue gain from eliminating the tax credits.
"However, if the decline in production exceeds 53%, there will be a net loss of tax revenues resulting from eliminating the tax credit," the study states.
The study estimates 23,900 jobs in the province are directly attributed to the film and television industry, and that the average annual income of an industry worker of $54,180 is about twice the province's average income. The estimated number of jobs does not include imported U.S. workers in British Columbia for the term of a production.
Among the study's other key findings:
- The film and television industry generates $87.5 million in tax revenues for the provincial government, and the film/TV industry receives $56 million in tax credits.
- B.C. production is highly sensitive to labor costs, including the tax credit. Each 1% increase in effective labor costs reduces production spending by 1.2%.
- There may be a retaliatory response if the tax credits are eliminated by the B.C. government, the study said:
"The industry response from decision centers in Los Angeles and New York and elsewhere may be to drastically cut production in B.C. in order to punish the province. This action would serve as a warning to other jurisdictions about the implications of removing film/TV production credits."
