If the film subsidy program in BC is so successful, why would the BC government have second thoughts on further support for film? The reason is because when you do the math, the result is a net loss for the government which is spiraling into debt. Let’s do the math.
Supporters argue that while subsidies cost the taxpayer millions, it lures productions to spend millions which in turn gets taxed leading to a greater return on investment for the province. Savebcfilm supporters have been posting this chart from a 2005 BC study that tries to show that:
The report does not only measure money spent by the government and studios, but also measures the tax revenue generated directly and indirectly. Ironically this same report concludes that when you factor in opportunity costs, the government loses money and on top of that, if the tax credits were removed, a substantial amount of production would stay.
Regardless, let’s just assume this chart is 100% factually correct and agree with Save BC film people that in 2005, the incentive program made a net gain of $55.3 million.
2011: BC Increases $$ Spent On Subsidies For Huge Losses
- In 2005, the BC/Canada government spent $65 million on various film subsidies.
- In 2005, the report says BC productions spent $1.15 billion which generated $121 million in total taxes.
- In 2011, BC productions spent about the same amount: $1.18 billion
- In 2011, the BC government increased the amount spent on film subsidies to $220 million.
When you compare the amount of money spent by BC productions in 2011 and 2005, they are virtually the same: about $1.15-1.18 billion (2011 source here). Tax rates have generally stayed the same so we can assume the film industry generated the same amount in taxes as reported: $121 million.
However, one thing has definitely changed: BC is giving a lot more money for film subsidies. Back in 2005, the PSTC tax credit rate was just 11%, in 2011 it was increased to 33%. In 2005 BC spent $65M in film subsidies. In 2011, the spending ballooned to $220M! (see page 126 of the BC Fiscal Budget)
Rather than a net gain of $55 million back in 2005, they would now have a net tax revenue LOSS of over $100 million in 2011.
BC Tax Credits Are A Subsidy
Despite the protests of the Save BC film people who say—if not scream– film tax credits are not handouts or subsidies, it seems none of them realize the credits are, and always have been, REFUNDABLE.
The PSTC is a refundable corporate income tax credit. When filing tax returns, your corporation may claim a specified percentage of the labour costs incurred in making a production. The credits are applied to reduce tax payable, and any remaining balance is paid to the corporation.
US Productions Pay Very Little Corporate Tax In BC.
And here is one last wrinkle: the film tax credits in BC can only be applied to corporate income taxes. And it just so happens that of the $121 million tax revenue from 2005, just $8.7 million was corporate income tax.
So even back in 2005, over $55 million of the $65 million issued tax credits were refunded as cash payout.
No matter what, film subsidy proponents want people to focus on the billions being spent but not the amount it’s costing the taxpayer to lure that business. Ask yourself, if you ran a store selling iphones at a severe discount would you attract alot of spending activity? Yes, but you’d have to caveat it with the fact that money you spent to provide that severe discount is running you into debt and eventually out of business. Do the math.