In our April 5 issue, we had a mega-huge feature on the Sask. Party government’s decision to axe the Film Employment Tax Credit (FETC). We outlined what the economic, social and cultural benefits were to having a functioning film and TV industry in the province, and drove home the point that without such a credit Saskatchewan would be unable to compete for film and TV projects with the dozens of other jurisdictions in North America that have a tax credit. You can read more about it here and here.
After weathering weeks of criticism from many quarters about the short-sighted and mean-spirited nature of their decision, and conducting some negotiations with SMPIA (Saskatchewan Media Production Industry Association) and other players in the film and TV industry to develop a replacement program, the government unveiled its answer yesterday.
Here’s a link to a brief CBC article. What the government is offering is a non-refundable tax credit on 25 per cent of production costs. The FETC was tied specifically to labour costs, so while the percentage is lower than the 35-45 per cent credit under the old program, it potentially would cover more costs (ie materials, equipment rental, and other expenses).
The problem is that because it’s non-refundable, the only time a production company would be able to benefit is if it actually turned a profit on the film or TV production. If you’re dealing with a project helmed by Steven Spielberg or James Cameron that wouldn’t be a problem. But most of the industry activity that occurs in Saskatchewan (and most of North America outside of Hollywood) is of the independent variety. Money is cobbled together from multiple sources to cover production costs, but once the product enters the marketplace, it’s not like it’s destined to be a blockbuster and earn hundreds of millions in revenue to recoup production costs and turn a tidy profit.
So why bother with a film and TV industry then?
Well, under the old program, the government (and the local business and creative community) benefited in numerous ways. Once a production was green-lit in Saskatchewan, goods and services would be purchased, generating PST for the province and creating income for the business owners and the employees that provided the goods and services, which they would then pay tax on and spend at other local businesses. Saskatchewan residents would be hired to work on the film, generating income for them which they would then pay tax on and spend in their communities. As well, those residents would develop skill sets and production capacity that could be used in all sorts of creative endeavours outside of the original film or TV production.
It’s called a multiplier effect, and it’s not dependent on a production showing a profit at the end of the day. In the CBC report, you’ll see that the province estimates the cost of the new program at $1 million annually. That’s in contrast to the $8 million it said it would “save” by cutting the FETC. So obviously the new program will have nowhere near the same impact as the FETC, and SMPIA has already released a letter expressing concerns about how effective the new funding arrangement will be.
“The new program is based upon a non-refundable tax credit program which has not been effective in other jurisdictions,” said SMPIA president Ron Goetz. “In fact, Saskatchewan’s program would be the only one in Canada that is not based on refundable tax credits.”
For now SMPIA is waiting to hear clarification from the government on how the program would work before it comments further.