By Ahmad Hathout
The Motion Pictures Association (MPA) Canada sent a letter to the federal and British Columbia governments with a proposal to extend tax incentives to global film players for a three-year period, post-pandemic.
The four-point proposal, obtained by Cartt.ca through a freedom of information request, includes federal incentives for foreign studios to hire Canadian production companies, an adjustment to the 23% withholding tax on non-residents of big-budget live action productions that would release some of that tax to them through a rebate, a tax measure to incentivize purchases of Canadian products and services by global studios, and incentives for those studios to develop production hubs and sound-stage capacity in Canada.
The April 30 letter, which was sent to then-Innovation Minister Navdeep Bains and Heritage Minister Steven Guilbeault, did not receive a response, according to a person familiar with the process. But the person said the proposal may surface again in the future.
The MPA counts as members Walt Disney Studios, Paramount Pictures, Sony Pictures, Netflix, Universal, and Warner Bros. Entertainment.
The proposal comes at a time when new foreign streaming services continue to flood the country, including Disney+, Apple TV, CBS All Access, and Amazon Prime.
It also comes at a time when Canadian Heritage seeks new ways to help Canadian content stand-out of the busy content highway. Netflix has already exposed to global audiences the Canadian hit Schitt’s Creek and has worked in the past with the public broadcaster CBC on Anne with an E. But the federal government wants more, proposing a modernized system where regulated foreign streaming players contribute equitably into Canadian content requirements.
In a survey appended to the letter and presented to B.C. officials, the MPA said 87% of the 1,500 respondents it surveyed support the proposed measures.
“MPA Canada proposes that the federal measures be in place for three years to help create opportunities for Canadian producers, workers/businesses, attract new projects to Canada, accelerate growth through infrastructure investment and increase tourism.”
According to data by the MPA, in 2018-19, global producers spent nearly $5 billion in Canada and generated a gross domestic product of nearly $7 billion for the economy. The group also estimates that 70% of film and television production jobs and economic activity lost between March and June came from the shutdown of global studio projects.
“The Covid-19 pandemic shut down all live-action production in Canada, including more than 67 film and television projects from MPA member studios,” the letter from the MPA said, adding it is thankful for programs such as the Canada Emergency Response Benefit (CERB), which provides financial support to employed and self-employed Canadians who are directly affected by Covid-19 at $2,000 per month.
Unpacking the proposal, the MPA seeks not to completely abolish the 23% withholding tax on foreign actors of large live action productions (base budget of $100 million), but to take a significant chunk back. It also asked for a similar tax policy for visual effects, animation and emerging augmented and virtual reality production studios with budgets of over $50 million and that spend at least 25% of post-production or visual effects budget and at least 50% of the photography budget in one or more Canadian provinces.
For incentives on the development of production hubs and sound-stage capacity, the MPA said this will “support immediate infrastructure development and construction jobs, including the repurposing of underused commercial space…over time, each facility that can accommodate new productions will expand the long-term direct investment in the Canadian economy.”
Canada is already a relatively attractive destination for productions because of our low loonie and a low interest-rate environment, making it cheaper to borrow and spend money.
In 2019, CBS opened a production facility and sound stages in Toronto. Earlier that year, Netflix established a production studio in the city. NBCUniveral, which has shot the popular legal drama Suits in Toronto, has been lobbying multiple provinces for favourable tax production credits. It has also launched the Hayu streaming service in Canada.
The MPA said the proposal would inject new life into Canadian tourism because “visitors from around the globe” will be “seeking new experiences in the places where movies and television are made.”
In response to a request for comment about how the proposal was received, Canadian Heritage said the following: “Since the beginning of the pandemic, Canadian Heritage has taken several actions to mitigate its effects on Canada’s audiovisual industry and its workers, including $147.3M in support under the Covid-19 Emergency Support Fund for Cultural, Heritage and Sport Organizations, and the $50M Short-Term Compensation Fund for Canadian audiovisual productions.”
“Proposals received from the industry, and exchanges with a broad range of interested parties, have helped to inform the response to date, and will continue to be taken into consideration in its efforts to support the sector’s recovery in Canada.”
