BC Film Commission: #SaveBCFilm Supporter Incorrect

#SaveBCFilm supporters have been circulating a Vancouver Sun op/ed article by BC film worker Daryl Makortoff. He writes that the program in BC is not a subsidy program paid for by taxpayers. In fact he was so sure of that he came on my blog yesterday to argue that the number I got from BC Film’s own website was incorrect.

That drew the attention of frequent commenter Adrian Mcdonald. He’s the Director of Research at the LA film office and an expert on film subsidies. Adrian offered to contact the BC Film office to verify if Mr. Makortoff’s article was correct as he proclaimed. Today BC Film responded to inform Adrian that Mr. Makortoff was wrong and the numbers on my site are correct. You can view the email here:

http://tinyurl.com/a5qvo47

The writer of this article is incorrect.  Tax credits are not based on taxes paid/withheld by individuals or corporations; they are based on total BC labour expenditures.  Your example noted below is correct.

Thankfully Mr. Makortoff has admitted he is incorrect after the email was revealed. As of this writing there has been no indication by Mr. Makortoff or #SaveBCFilm if they intend to retract the Sun article. #SaveBCFilm quickly asked a supporter to pull a video she created that similarly argued the same incorrect info in my last post.

Why are so many #SaveBCFilm supporters so reluctant to admit the program in BC is a subsidy?

After all, just yesterday BC Culture Minister described the program as such:

Bennett said the province has no plans to increase the $285 million in funding it provides in tax credits related to film production.

“While it’s a great industry and I definitely want to keep the industry thriving in B.C., basically what the mayor is calling for is for all provincial taxpayers…to throw more money in to subsidize an industry that’s essentially based in-not completely, we make movies all over the province-but it’s essentially a Vancouver-based industry.”

Today, the Vancouver Sun posted an op/ed by Professor Rhys Kesselman of the School of Public Policy at Simon Fraser University. Not only does he call the program a subsidy, he issues a brutal and truthful take down of how ineffective and expensive the program is:

The incentives used by governments can take the form of cash payments or reduced taxes through credits. In either case they are equivalent to subsidies that favour the chosen industry, and the “refundable” nature of B.C.s film tax credits mean they are made as cash payments to firms with low or nil tax liabilities.

#SaveBCFilm sort of has to play poker with it’s position. If they reveal their cards that show the program is a massive taxpayer subsidy, they lose support in asking for more money on top of what they already receive. So they resort to calling the program a “tax incentive” or “tax credit” as if to imply that the money paid to the US studios is just a reduction of taxes and you the taxpayer lose nothing. The truth is the taxpayers are losing millions and the more the truth comes to the surface, the more they lose.

Why Is VFX Soldier Fighting This Issue?

At one point Mr. Makortoff asked why this VFX blog has concerted such an effort against the subsidies in BC. My response is worth re-posting:

I have a huge vested interest in this. Many of my colleagues and friends around the world have lost their jobs, their homes, and have had to leave their families because of these subsidies. Many of the companies we work for have either had to move or go out of business because of these subsidies.

As you have learned today, they have artificialized the price of visual effects work and create artificial markets. This hurts workers, this hurts unions, this hurts companies, and only help the bottom line of rich US studios. I’ve devoted the last 3 years of my life to putting a stop to it.

Soldier On.

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33 Responses to BC Film Commission: #SaveBCFilm Supporter Incorrect

  1. El Pumpernikel Escarlet says:

    Yeah but they get cookies.

    Great post, Soldier. :)

  2. VFX Traveller says:

    To anyone who can answer (Adrian, Soldier etc). Been following with interest, but I think the stumbling block for a lot of people myself included is this particular part of the equation.

    In the PSTC pdf that was attached in the email reply to Adrian it says

    “When filing tax returns, production
    corporations may claim a specified percentage of the
    labour costs incurred in making film, television, digital
    animation or visual effects productions. The credits
    are applied to reduce tax payable, and any remaining
    balance is paid to the corporation.”

    So if 100k is spent on labour.
    33k is returned via the PSTC

    ……then I don’t get it. How do we get from there, to BC handing over cash to the production company. How is there ever any remaining balance to be paid to the corp? It must be doable since it’s written into the PSTC I quoted above.

    I can’t get my head around this and I think maybe other people can’t either. If they only get 33% back on what you spend, how can there be a net loss on BC side of the balance.

    Not questioning the accuracy of what is being said, I just don’t understand it, apologies if I missed it being explained in an earlier post

    • Sorry I didn’t get to this sooner. And it looks like others have explained in full. And please, no apologies are needed. This is an inherently confusing topic.

      People often confuse the public cost as being offset by the private benefit. The public cost is $200+ million annually and the private benefit is roughly $1 billion, also annually. But the private benefit does not mean an ROI for the public.

      Put another way, pretend you are the “public” and you invest your money in 401k stock program. Do you care if your investment made money for other people or made money for you? More important, how angry would you be if others made money off your investment and you actually got less back from the 401K than you put in? Because that is exactly what is happening with film tax credit programs like BC has, or Ontario, or Louisiana, or Georgia, or….anywhere.

  3. vfx oldster says:

    That 100k is going toward paying the employees, not to the BC government directly. The confusion comes from people thinking that the 100k is the tax bill.

    • VFX Traveller says:

      Right, but you still have 100k coming into BC and 33k going out so BC has 77k gain on the process. I don’t get how you can end up with more money leaving BC than entering it.

      The consensus seems to be that BC suffers a net loss from this arrangement, and the PSTC itself acknowledges that “any remaining balance is paid to the corporation” but I don’t get where it can come from or how there can be a net loss.

      Maybe if someone could just lay out a situation showing how a production company comes to BC, spends it’s budget there, applies for PSTC, and BC ends up giving back more than it has taken in.

      • vfx oldster says:

        The 100k goes directly to the employees but with 33k of it having been paid by the government instead of by the studios. The studios don’t leave with more money than they came in with, but they paid a lot less than market rate for the labor. Of course BC will get some of that money back when the employees pay their taxes and buy stuff locally, but the government’s own numbers suggest that what they get back is less than what they had to spend.

      • vfx oldster says:

        Maybe the other confusing thing is the way it is worded as a “tax credit.” When it comes time to calculate the taxes, they’ll just apply that 33k against the taxes due. If the 33k exceeds the taxes due, you get the remainder of that sent to you as a check. So it really is unrelated to the actual taxes owed.

      • Ashes says:

        The BC Government doesn’t gain 77k. The worker gets that 77k, which is part of the 100k, and will then pay taxes like income and sales tax on it which averages at about 10%. So simple put this is how is breaks down:

        Worker gets 100k
        Studio gets 33k
        BC pays 33k
        BC gets about 10% back on that 100k

        Final result:

        BC gets about 10k back through income and sales taxes, but paid 33k. The loss is 23k.

        Now this number is going to flucuate based on varies in applied taxes, but even if you tack on the highest tax rates available the BC government still will not make a profit on this.

      • VFX Traveller says:

        Thanks Ashes,

        That’s a lot clearer. so the only argument that savebcfilm can really have is that the knock on effect generates more than 23k of value for BC. and as vfx oldster said, the governments own figures show a loss. I have to say I found that surprising until i did some back of hand calculations

        100k paid to worker
        -20k federal tax
        -10k provincial tax
        leaves 70k spending money

        10k saved lets say

        So 60k being spent in and around Vancouver and BC. Of that 40% would have to be coming back to the BC gov for it to break even, which sounds unlikely to me.

      • Ashes says:

        @VFX Traveller, you’re welcome. Yeah, it’s not hard to see why the BC government isn’t making it’s money back. If this was a tax incentive for a purely domestic film industry, I could see why the government would be willing to take a hit for a bit while the industry got it’s foundation. Of course, the government would then rescind the credits once the industry got going.

        However, these incentives are going to large, wealthy foreign studios who are not actually building a local industry and are costing millions. It’s hurting everyone in the long run.

        Hoping things well stabilize and life will improve for all. Well, I can dream. :)

  4. Steve says:

    Hi, I was just wondering: Would you still have a problem with tax incentives or credits if – after a full, independent audit – they were shown to provide a net profit to the region offering them?

    • vfx oldster says:

      Many of us would still have a problem with them because they violate trade agreements and cause artists to chase our own jobs all over the world.

    • Steve, at their current high rates, these programs have never–ever–been shown to pay for themselves. Every comprehensive study done, including one in BC from 2005, has shown there is a net loss. The evidence is pretty overwhelming.

      • James OK says:

        But by now failing to match Ontario’s credits, production in BC is drying up, and since Christy Clark has refused to support the industry, get ready for a net loss of people as they sell their houses in BC, relocate their families to Ontario and start to buy houses there. If you want to see real economic impact on municipalities, look no further than property taxes.

        Total Recall kicked $25 million into Torontonian wages alone. The government certainly gets it there.

        http://www.thestar.com/news/2011/09/22/how_total_recall_saved_torontos_film_industry.html

  5. Guzrda says:

    Why no1 want to give me an answer. How to avoid subsides?
    For someone who is new in this, and want to be animator, and soon or later i want to move in Canada.

    • Beepernps says:

      Guzrda, you can marry a canadian if you really want to go there bad enough. Are you sure you want to be an animator? Not trying to dissuade you, but prospects aren’t the greatest. Also trying to save you on personal debt.

      • Guzrda says:

        Thanks. Yes i really want to be animator why? They are to animators or the salary is low for animator or what? Please tell me.

    • The Scarlet Pumpernickel says:

      You can’t avoid subsidies if you want to work in film/tv/games. These are deals made from state/city governments and the movie studios themselves, and they affect artists involved with film all over the globe, whether you like them or not. Some of us are trying to fight them. Best you can do is get involved in this conversation and help raise awareness about them, and contact your representatives about them.

      • Guzrda says:

        I see your point. What can i do to help? Do you think that we can win?
        So i or anyone can be send to other part of the world at anytime?
        If i don’t want, they will fired me?

      • James OK says:

        So? You can’t avoid subsidies if you want to work in any industry. Why would film/tv/games be any different?

  6. andrei gheorghiu says:

    All the world is going to Canada…and this is another reason why the fight against the companies and government who are dealing with subsidies is lost. Too many hunger people willing to work hard at extremely low price. How can you win Soldier?How can you tell them what they do is wrong? Europe , UK, States are not doing well at all. So , let’s go to Canada

  7. Daniel K says:

    I apologize if this has been covered in the past, but do we have numbers on VFX Professionals who are Canadian citizens Vs those in Canada on work permits?

    Would be interesting to see how many Canadian jobs this program is actually creating Vs how many people are migrating.

    • Craig says:

      I am curious about this too. I worked in a traditional fx lab in BC around 2003 and the boss told me I was the first local resident to ever work for him. Everyone else was a foreigner–US, French…

  8. Studio_Spotter says:

    Its shameful the ferocity this issue has exposed; even to the point of misinformation for what is essentially free money. And they arent happy with the amount they get now. They want more. It almost seems they feel entitled to more. Put that energy into earning it on a level playing field and you might not have to whine about not receiving enough free money.

  9. Dave Rand says:

    This is a response I got after offering some simple suggestions on how to build a sustainable film industry on their own turf and under their own steam. I did this out of love for Canada and my friends employed there, many of whom may soon be displaced yet again.

    Not one of my points were addressed instead I got this propaganda:

    “It is a TAX INCENTIVE… something many industries get in BC to encourage economic growth. And yes, you are right, it is OUR money we get back… we pay into it with OUR taxes when we are working and 25,000 people employed in film pay a LOT of taxes, not to mention all of the suppliers and businesses that depend on us for the bulk of their business… they pay taxes as do their employees. So it IS our money.” (no it’s cash money sent back to America for an industry that needs no help whatsoever sustaining itself. Your politicians are buying votes with glamour money)

    This kind of misinformation spreading is making them all the pawns of the American Film industry.

    When one of their own local experts spelled it out properly in the Sun (see link above from soldier) it was encouraged to send him a big WTF and cut and paste this explanation without addressing any of his excellent points about sustainability.

    (from We Create BC’s facebook page)

    BC’s Motion Picture Production Industry – Dispelling the Myths

    MYTH: British Columbia’s motion picture industry is largely a foreign enterprise with limited benefits for British Columbians and BC owned production companies:

    FACT: Robust foreign motion picture production in British Columbia brings on average $1 billion in new money to the BC economy and employs 25,000+ tax paying BC residents. ( note foreign .. it’s only perpetuating that )

    In addition, a healthy infusion of foreign production dollars helps to sustain a $1 billion infrastructure investment in BC – which in turn enables BC owned production to develop by taking advantage of the talent, infrastructure and supply chain that is widely supported by the former. ( so why is this still dominated and completely dependent on foreign studios after all these yrs? )

    MYTH: British Columbia’s motion picture industry is a special interest group receiving preferential support from the public purse:

    FACT: The tax incentive program that encourages production in British Columbia is a common economic development tool used across a range of BC business sectors (i.e. in BC, logging, mining, book publishing, small business); this mechanism is widely used around the world. (as the Sun article states, these industries actually truly build LOCAL business that becomes self sustainable)

    Tax incentives specifically designed for motion picture production were pioneered in Canada and were so effective at industry building that the model has been widely emulated across the US and Europe. (yes and using the same propaganda all of you fell for , and in reality becoming a tool that keeps the fences up not down)

    MYTH: BC’S motion picture production industry is ‘subsidized’ by BC tax payers:

    FACT: British Columbia’s tax incentive program for motion picture production does not provide subsidies. It provides a tax credit or rebate on labour based production costs – that is, productions spend new money in the province and subsequently (12-30 months later) claim a rebate on the labour costs; no production dollars spent, no credit received.

  10. random says:

    In 2008 nearly every US bank was insolvent during the eruption of the worldwide financial banking collapse that was caused and created in Wall Street, USA. Instead of allowing markets to clear the way of corrupt and incompetent businesses, the US taxpayer was put at a gunpoint to subsidise and fund bankrupt banks across the country. Including the three largest West Coast banks, BoA, WaMu and Wells Fargo. Who incidentally also are the major investment backers for hollywood production finance. Have a look at the some of the Senate exchanges on youtube etc. for 2008 as well Alan Greenspan’s testamony to congress.

    On the other hand, some other movie-making nations have flourished since because they had sound banking systems and protective laws in place and so were not in danger of economic collapse because of corruption. Going forward, they do not need to burden their tax payers for next 30 years with gifts and subsidies to corrupt bankers who have bought off politicians. Those nations are New Zealand, Australia and Canada. Unfortunately, the UK is just as corrupt and bankrupt as Wall Street and the State of California. So there are your options. Do business in a state that is close to collapse, civil unrest and admitting its bankrupt status at some point, when the tax payer subsisidies to bank end, or do business in a place with a stable economy, law, police, health services, and so on, where the currency is not about to fall through the floor at any second, rendering your company profits worthless in the flash of a market panic.

    So who is up for stopping the easily traceable subsidies to banks and local municipalities then in socal? Who is up for pulling the rug away from these subsidy hungry critters in US government, Wall Street, Ford, Chrysler, then? Let them threaten, when they collapse, the dust will settle and the market will pick new winners from fresh growth. Who is with me!?! Who is for free markets and Capitalism here?!?

  11. Craig says:

    Canada isnt a movie making nation. Australia and NZ I will give you, but as a fellow Canadian once said, Canada is to moviemaking what the Taliban is to modern technological society…although I think that was a little unfair to the Taliban. They do use cellphones after all. In articles quoted above Total Recall, Robocop are mentioned, the type of films Canada has never made entirely on its own–ever. In the old days we used the excuse we didnt have the budget(even though other countries managed to be imaginative without difficulty). Now we have no excuse but still dont do it. We make musicals about hockey, quirky comedies about trailer parks, and the rare sci fi films about disease and necrophilia. We did find the money to finance the Left Behind series though. I guess that’s a start. To get an idea of the clueless nature here–check Canadian film industry journal Playback magazine’s list of the best Canadian movies of all time. http://playbackonline.ca/2002/09/02/best-20020902/ and take note of the absence of imaginative genres.

  12. green tea says:

    I every time spent my half an hour to read this webpage’s articles or reviews everyday along with a mug of coffee.

  13. […] We’ve verified this before with the BC government after a BC worker who wrote an OP ed in the Vancouver Sun explaining how he understood how the film subsidies work. He was dead wrong. […]

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