Government Unveils New Support Program For Film Industry — Or Does It?

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.

Author: Gregory Beatty

Greg Beatty is a crime-fighting shapeshifter who hatched from a mutagenic egg many decades ago. He likes sunny days, puppies and antique shoes. His favourite colour is not visible to your puny human eyes. He refuses to write a bio for this website and if that means Whitworth writes one for him, so be it.

12 thoughts on “Government Unveils New Support Program For Film Industry — Or Does It?”

  1. This is a complete stunner. Not only does this version of the tax credit only help companies that are making big profits, it also actively discourages investment from outside of the province – which is really the whole point of the tax credit.

    Oh, and by the way, if people in the film industry were making the kind of profits they would need for this new tax credit to help them, they wouldn’t need a tax credit in the first place.

    Example – you make a $1 million TV movie. Let’s say $400,000 of that is eligible for the tax credit – wow, that’s $100,000!

    You sell your TV movie for $1.2 million (after everyone else – distributors, tv networks etc – takes their cut) – Hooray, you’ve made $200,000! Now let’s get that tax credit… But wait, corporate tax rate in SK is about 10% so you’re paying $20,000 SK tax on those profits – so the other $80,000 you’re eligible for goes up in smoke? Useless, even for a profitable production. And would that $20,000 convince you to film your $1 million project in Saskatchewan, when you could easily get $100,000 or more in Alberta or Manitoba, in fully-refundable tax credits?

    And nobody outside of Sask. wants to invest in your movie, because everywhere else they can get a refundable tax credit – which means the money can be used against an operating loan from the bank (non-refundable tax credits can’t) so you can do things like pay your crew. And if you break even, everyone still benefits – Unlike the “new” SK tax credit, where you only benefit from the tax credit if you’re already making a large profit.

    Wow, really?

  2. We either have a government that is very stupid – they have no idea how film/tv/digital production financing works and they announce a new program that won’t work without consulting with the industry affected.

    Or we have a government that is totally cynical – they know the program won’t work but figure enough of the population won’t be aware of that,they’ll just hear that the government announced a new program for the film industry, so what’s all the fuss about? This announcement is not about making Saskatchewan economically competitive, it’s a political move to try and kill the protests about the first bad political decision – to eliminate the film employment tax credit.

    Either way, the result is the same. Brad Wall’s government is killing off an industry that has brought economic and cultural benefits to Saskatchewan that far outweigh the costs of any incentive program that the government funds.

  3. It is disheartening that our government has chosen to put forth a ‘pacifier’ deal. This is no deal at all if you ask any person working in this industry. And I am saddened that in the last few weeks as I tried to speak to this subject, I have heard the most ignorant and misinformed views. “If it doesn’t make money, why should we support it?” First of all, whether or not a film makes money in the end is the producer’s risk, not ours. If the producer chooses to make his or her film in Saskatchewan, the money spent here is atronomical. Accommodations, catering, lumber, fixtures, set decor, costumes, hair and make up, gas, rental vehicles, etc, not to mention the hundreds of thousands of dollars in income that supports many, many Saskatchewan families. That money is ours for the keeping, and if the movie is a flop, so be it. That is the risk taken on entirely by the producer. More importantly, if we were to pull government funding on every agency that receives taxpayer dollars and DOESN’T turn profit, our provincial infrustructure would crumble. City parks, provincial parks, schools, sidewalks, community associations, The Saskatchewan Arts Board, hospitals, the list goes on and on.
    I would caution anyone who supports the government’s decision to cut this program, and suggest that you think about what kind of society we have when we don’t have the Arts. Music, books, paintings, poetry, television, movies – all these things preserve our stories and keep our culture on record. They have for thousands of years. People seem to forget that. For me, the small amount I pay in my taxes to keep this industry vibrant and growing is worth every penny.

  4. #1#2#3
    I 100% agree.

    I typed it before,( para-typing ); bad advice given, but that was the path chosen by the SK. party anyway.

    Remember that Mr. Fougere is part of the SK. gov’t too, ( sort of ).

  5. I agree with the government 100%, there are more important things going on in the province that the government is worried about like people with disabilities and seniors. The money is going to a good cause.

  6. #5: The previous tax credit was bringing in more revenue to the province than it cost, more than paying for itself and putting revenue back into the coffers for things such as people with disabilities, seniors etc. The numbers back this up.

  7. I so dislike large majority governments, the best thing that could happen to Brad Walls government, is that they would drop 20% points in the polls. Maybe just maybe,it would bring them back to a reality, a reality that says everyone matters, everyone is welcome here in Saskatchewan. What the gov’t needs most is to show a little humility, humility works. Stop with the trampling of people,stop with the bullying Feeling so sad, that this is nothing but smoke and mirrors, and we will lose these wonderful creative folks that WERE able to make Sask. home.

  8. Personally, I think the industry should be supported.

    However, one fault I see is the supporters continually stating how much money the previous program produced. Those numbers don’t seem the most concrete, as most multiplier effect scenarios are, and PLEASE remember that the money allotted to the program could potentially make more money if directed elsewhere.

  9. #9: Or, conversely, it could make less. Sort of a moot point. I don’t think anyone has ever viewed culture as a high dividend performer, unless you’re Damien Hirst and are gluing diamonds to platinum skulls.

    The real question is, is the ROI reasonable both in direct and ancillary benefits, i.e. triggered, additional monies returned into the economy, and the diversification of the workforce that adds creative capital to a region that surely needs it?

    Here are some examples of concrete numbers, relating SFETC figures to overall production volumes, i.e. amount of money spent in total:
    http://www.smpia.sk.ca/assets/files/pdf/EconomicsoffilminginSask.pdf

    (But I thank you for your support.)

  10. Are more details on these figures available? Would provide more insight, as it stands are currently large summaries.

  11. Both sides have their reasons and will say the same things until their faces turn blue. Fact is this. When this original Film Employment Tax Credit was first created, it was to help attract and establish a film industry here in the province, then it would be discontinued. Instead it became something that had to be relied on all the time and that wasn’t the intention for it.

    So now that it is discontinued, we are hearing from those who’ve come to expect it would be here forever. Nope!

    So now the Sask. Gov’t has offered an alternative supposedly based on the feedback from those involved and now they once again say it won’t work.

    Well, guess it’s better than nothing, right? Might as well be nothing now.

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