BC VFX Owner: BC Subsidies Exploited To Send Work To China

I came across a CBC article that was dated last year titled B.C. visual effects artists say work being sent overseas:

Movie visual effects (VFX) artists working in B.C. say post-production companies are taking advantage of the province’s tax credits, then subcontracting out work to China and India.

The page on my viewing had 0 shares for Facebook, Twitter, and only one share on Google+. I found that odd as I know either me or others would have immediately shared the hell out of this. Then again it’s known that facilities in BC get subsidies and farm work out to India and China but producers aren’t claiming a rebate on that work.

What would really be news is if someone was committing some sort of fraud as some readers have pointed out. The article above seems to have been based on this CBC interview with Tinderbox VFX owner Greg Vernon:

http://www.cbc.ca/player/RADIO+HOLDING+PEN/Jinghua/ID/2339467576/

What was not included in the article above was some pretty substantial information revealed by Mr. Vernon in the recording. Last year Greg Vernon closed his VFX facility Tinderbox in British Columbia and left for Seattle. In the interview he talks about the challenges he was facing with work going to China. Mr. Vernon claims that because of a lack of oversight and auditing there are very shady practices exercised such as shell companies being opened in BC specifically for subsidies but sending all the work to China.

However it gets even more interesting to hear what else was left out of the article. When asked what BC should do he initially supports an increase to the already 45% subsidies on BC resident salaries for regular production workers. However he then points out that over the long term that is not sustainable so he recommends eradicating subsidies and slapping taxes on anyone who sends work out of British Columbia, even the cheap labor locations like India and China. Now I’m in the middle of a legal effort to slap duties on subsidized VFX because it distorts the market but I’ve always said if a place like India and China can compete on quality and price I saw more power to them.

However this latest claim certainly supports what I’ve heard by contacts in the industry that fraud is occuring with BC’s subsidy system. You live by the subsidy, you die by the subsidy.

Soldier On.

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34 Responses to BC VFX Owner: BC Subsidies Exploited To Send Work To China

  1. Pom Bermer says:

    Im going to just go ahead and say it….. RAINMAKER!!!!!

    Most of the animation on their latest films are being remotely done in China……

  2. Hahahaa says:

    Again this is not news based on fact but rather hearsay and rumour. Fact is the audit process is pretty substantial and each facility have staff devoted to all the necessary paperwork that has to be filed to get the rebate.

    If this was news the opposition leader would be all over this like a rash to discredit the government. Stories like this just help make the audit more robust as those doing the audit need to be seen to be doing there jobs correctly.

    Again as soon as you have actual proof please splash that all over the papers. I would be happy to see someone get caught as that company would be be finished.

    To be clear a lot of tasks are completed offshore at all the major facilities here. Some people are upset there jobs are now gone to cheaper labour markets so they are quick to jump on the rumour mill. The only people who know what is actually claimed as BC Resident are very few senior management at al the companies far above most peoples pay grades here. Even VFX Supes at the bompanies have little idea on that side of what is being claimed.

    • Long Time Post and VFX Producer says:

      Precisely. The audit process in BC is costly, time consuming and exhausting. Anyone who fails it or commits fraud is gone…. VFX Soldier thinks he can sway public opinion in Canada and that’s a joke. If he wants real corruption he doesn’t have to come this far north. Head south east actually.

    • vfxinvan says:

      Exactly. But you have to understand something. VFXSoldier, this blog, and the upcoming protests have become personal. It’s no longer about the facts or what the real problems are in our industry (fixed bids, poor management, free OT, and poor labor conditions). No, this is about “MY JOB WENT TO BC” and I’m angry. That’s it. Period. They don’t care about facts.

      I work high up in the VFX Industry in Vancouver and have for years. I’m close to the people submitting the rebates for many of the major houses. And I can tell you a number of things that are facts from the ground. Andreas Jablonka, Dave Rand, Scott, Daniel, and others will refute all of this. But I’m actually here with on-the-ground information and not staring at government web sites and trade figures from groups with vested political interests. I do this for a living every day in BC.

      1) As you have said, the rebate process is complicated and audits are commonplace. Film work has been going in BC for 30+ years. This isn’t the wild west where you fill out a rebate form, no one checks it, and you instantly get 60% of a workers paycheck as a rebate. There are teams of people at every big BC Fx house whose job it is to track work visas, document residency, submit claims, and monitor this stuff. The big houses (Sony, MPC, ILM, DD, etc) don’t take these issues lightly.

      2) NO ONE at the big houses in BC is getting remotely close to 60% average rebates on qualified workers income. That’s a bogus number that keeps getting passed around based on theoretical maximums stacked together. It’s a scare number. The real number is that vfx houses here get in the neighborhood of 30% rebates for qualified employee income. That’s what Studios get back in the real world for work done in BC. If it was 60% do you think ANY work would be done in London, New Zealand, Australia, etc? Of course not. BC does not have double the rebate credit in those other countries. It’s simply not true. But they’ll put it on their signs and slogans and shout it from the rooftops because it says that on some web page somewhere. Real world proof be damned.

      And to throw this gauntlet down even further Andreas, Daniel, etc., do this. Post ONE article, anectdote, quote, or other information from one of the big BC FX houses where they confirm your 60% number. Pick ANY (Sony, ILM, R&H, MPC, DD, Scanline) of the main houses that does a volume of work and find someone there who says they get 60% rebates back and I’ll shut up. Not some indie producer who works on shorts and commercials. Not some random person who got 60% on a project they did with 5 people. One of the main VFX houses here. Get ONE person to go on the record who is aware of the accounting side of the business to confirm that they get 60% rebates. I won’t be waiting anxiously because you’re not going to find anyone. Because ITS NOT TRUE.

      But again, this site and the upcoming marches aren’t about proof or presenting real data. Or even in dealing with the real issues in the industry. They are mad and the current whipping boy is subsidies, specifically in BC. Next year after all this dies down their target will be something and somewhere else. And still the real problems in the industry will persist. We are a house divided and sites like this just make the problem worse.

      • Annoyed says:

        The actual correct amount of the rebate (all information indicates it is approx 58% per salary) is irrelavant.

        What matters is – is it enough to cause jobs to relocate purely for the rebate? The answer is a resounding yes.

        Argue what percentage it is all you like. It is causing people to lose jobs.

        It is the subsidy and only the subsidy. The reason this can be taken as a fact is because people aren’t being told “we’re doing the work with people in BC instead”, they are being told “Your job is moving to BC, you need to follow it or lose it”.

        This is not that difficult an issue to grasp.

      • minoton says:

        vfxinvan, as has been stated in these blogs numerous times, the vfx facilities do not get the big percentage paybacks. Those go to the American studios. The vfx houses only get a labor tax break, not all the cumulative subsidies that total up to 58%. So your payback is around 30%. But it’s the subsidies to the American studios that is the main driving force of sending work to BC. It’s not because there was some sort of Cambrian explosion of vfx talent in BC to send all this work to.

      • vfxmafia says:

        @ minotan…

        Im still confused who gets what money….especially about the payroll kick back…..to the VFX house and how the Film studio gets theirs…

        I appreciate the way you explained the 58% slash %30 figure….which under my estimates are pretty accurate…

        Im the perfect example. Im X-LA….i relocated to Van BC by end of december…..with a full relocate 3 year contract. NO house in US …no family in US….full temp residency in Canada.

        By that account I would be the perfect 58% kick back guy….

        So Im guessing I am the 58% guy……… of my (I guess estimated annual salary ) goes to the US studio….in cash up front correct?

        Lets say I make $150K a year Canadian…..im hired by BC VFX company…..how much goes to the Film studio upfront?…and how much of my salary is paid by the Canadian gov……to the VFX house?

        1. And how do they come to that 58 % or amount from my salary?

        2. What if the BC VFX house is doing 5 different movies from 5 different studios? Do they get 5 different subsidies from my job?

        Sorry for asking this a couple of times……..(I hate to ask Scott Squires again)

        .

      • minoton says:

        Mafia, Scot Squires, or Adrian MacDonald, who’s corrected some of my misunderstanding of the numbers, would be much better people to explain the full numbers and percentages of the various subsidies involved. Scott has one entry on his blog that is a huge compilation of information and links to government pages, news articles, videos, and op-ed pieces on the use of subsidies.
        There is a tax break for the vfx facility on labor, and there is money paid directly to the US studios, a % of the production budget spent in the subsidized location, used to lure work to that location. All of these subsidies, if used cumulatively, can amount up to 58% paid out by the government.

      • “… say I make $150K a year Canadian…..im hired by BC VFX company…..how much goes to the Film studio upfront?…and how much of my salary is paid by the Canadian gov……to the VFX house?”

        The subsidy money goes directly to the studios. They count on it so much they’re no w including figures in their contracts with vfx companies to make sure the vfx company makes up any difference in the amount of money the studio receives. (i.e if a vfx company decides they need to do part of the work in LA or UK or wherever else due to scheduling or better specific workers then that doesn’t qualify)

        No money is paid to the vfx company. (if by chance it is then in the contract and budget the studio insists on getting it) The only thing a vfx company gets is the potential opportunity to bid on work and the greater likelihood of at least getting some work because their location has bribed the studios to do so.

        Subsidy programs vary – (states and countries and regions all have different methods) If an area provides ‘tax credits’ then the productions can sell these, sometimes even before they make the film. And if they are getting subsidies they can also get the banks or other investors to pay in much easier, after all they’re expecting to get x million from a government. Both of these factors mean that even if another company in US matches the subsidy reduction, the studios typically still choose to go with the subsidy. It’s money up front or at least a guaranteed amount, not just a reduction.

        Regarding the 58% – Most Canadian subsidies are based on multiple factors that can be combined. If certain criteria are met then a subsidy is applied. And if another criteria is met (Canadian resident) the another subsidy is stacked on top of that one. All of the this money goes to to the studio, not the vfx company. Each country, region and state offers different ways of calculating the amount. In this particular case the BC government has determined the math such that qualified workers are to get approx 58% (you’ll notice it doesn’t really matter the exact percentage. Sure to the studio that dollar amount adds up and they will compare the numbers with other locations but the studios are eager to eve money, no matter the final percentage).

        Example: If a vfx company has a worker who is not qualified for a worker subsidy then the studio only gets x amount. If the worker does qualify then the studio has the vfx company fill out the appropriate paperwork with them and then 58% (or whatever the math results in) of that worker’s salary is added as cash subsidy to the studio. The vfx company never sees that money but they do know the higher percentage of ‘qualifying’ workers they have, the more attract their company will be to the studios who review the bottom line after the bid numbers are all adjusted for the subsidies available at that particular company in that particular area. That’s why Sony and most other companies are encouraging their workers to shift to Vancouver. They won’t all be qualified instantly but you have to start the process sometime. And because Vancouver did not organically grow based on real production needs locally, much of the workers have to be brought in.

        “2. What if the BC VFX house is doing 5 different movies from 5 different studios? Do they get 5 different subsidies from my job?”

        Once agin the vfx house sees no money themselves. Each film is done as a unique production by US studios. So each film files their own paperwork and receives their own subsidy amount. If film A did $30 film and used x amount of Candian labor, etc then they would get one amount. If film B (whether from the same studio or different US studio) spent $100 millii band used y Canadian labor then they would get a different amount of cash.

        You as a workers are included in any calculations for any project that qualifies that employed you as a qualified worker. If you worked on 2 films then the amount you were paid on each would be used to calculate the cash to each film respectively.
        Film A you worked for 3 months and were paid $40,000 then that film would get 58% of $40,000 more. You worked for film B for 5 months and were paid $60,000 then that would be calculated similarly and paid directly to the studio.

        More info:

        http://effectscorner.blogspot.com/2012/08/visual-effects-tax-incentives.html

      • VFX Soldier says:

        “Post ONE article, anectdote, quote, or other information from one of the big BC FX houses where they confirm your 60% number. Pick ANY (Sony, ILM, R&H, MPC, DD, Scanline) of the main houses that does a volume of work and find someone there who says they get 60% rebates back and I’ll shut up.”

        Our sources were producers who have worked with these facilities and each independently confirmed the 60% number.

        While they cannot reveal who they are the same way you cannot reveal yourself because they need to have their identities protected, they are very solid sources.

        Nothing personal about that, just the facts.

      • vfxmafia says:

        Thanks Scott for the response..

        Daniel…I don’t doubt that 58% number…..especially in my case…I was asked to move before the end of the year. And i am finding out that this is part of the clause….for the rebate…..aparantly they want you to be on record paying taxes the prior year…….artists who relocate and have primary residence in canada get the biggest subsidy….(which means family moves and there is no longer a US home or mortgage)

  3. VFX_Reckoning says:

    Is there a BC government organization that needs this information to begin an investigation? If this kind of stuff is still going on, someone needs to take these fucking criminals down.

    • Hahahaa says:

      Please don’t think the government does not investigate these stories because they do and there have yet been revelations of wrong doing. CBC is a state run Media outlet “government funded” so you can be sure any stories like this are in the eye all all levels of government.

    • Long Time Post and VFX Producer says:

      I produce VFX in Vancouver for a US Employer and our own auditors do a pass on the books of all the VFX Companies books even before the CRA audits them.

      How about those criminals from US based Axium Payroll who went bankrupt and left thousands of people paycheck less, only to reopen as Ease Payroll? Or Deluxe who purposelessly kept digital work off their film lab lot in order to keep digital workers from getting sucked up into IATSE Guilds?

      Plenty of nefarious stories swept under the deck in your own backyard dude.

      • Disgruntled says:

        So you’re telling me its LEGAL for a company to hire a worker just before the new year, so they can somehow claim them as a resident, set them up with a Canadian bank account and employee information and pay them in Canadian dollars, then ship them off to India for the actual work?

        Thats legal according to you?

        Because I know first hand of 2 people that applies to and other people here have similar stories.

      • Long Time Post and VFX Producer says:

        Where did I say that was legal? But I will say the chances of getting caught doing that are incredibly high.

      • Disgruntled says:

        We’ll see…if the checks are as solid as you say they are 1 or 2 companies this year should be getting the boot by the canadian government.

  4. James says:

    You all signed up for the most corrupt industry in the world. And now that jobs are scattering around the globe you are blaming every one but the LA studios that created this subsidy monster in the hopes that some of that 80’s & 90’s ILM glory might return to Califonia. Why not take the studios to court? Because it’s easier to be jingoistic and lash out at foreigners than to bite the hand that used to feed you. It’s really easy to:

    http://canadahater.wordpress.com/2014/02/27/blame-canada/

  5. Andreas Jablonka says:

    How about BC satelites hiring workers on work permit to collect subsidies (or pass them through to the us studios) and then send their workers to india…?

  6. Misha says:

    …it’s funny that reddit bloggers think an article one page long is too long to read, and needs to get to the point sooner…..ha ha…

  7. Peter Greenaway says:

    “Quebec’s generous incentives have fed a gold-rush atmosphere in Montreal, especially in the visual effects field. Several visual-effects companies there, notably Meteor Studios, Damn FX, Red FX, Fake Studios and Newbreed VFX, have left their artists temporarily or permanently unpaid when they got into financial trouble.”

    http://variety.com/2014/biz/news/cinesite-vfx-to-open-montreal-branch-1201065612/

  8. Long Time Post & VFX Producer says:

    Those of you who have been mislead by this blogger that even the leaders of government in BC think they are in a race to the bottom might want to read this (pages 25 & 26 specifically):

    http://www.bcbudget.gov.bc.ca/2014/sp/pdf/ministry/jtst.pdf

    “Support work to ensure an effective tax credit regime for film production, including by redefining distant location eligibility to include Victoria and by extending the Digital Animation or Visual
    Effects (DAVE) credit to include post production.”

    Increasing the incentive for post is not exactly a government thinking they are racing to the bottom…

    “Estimates show that motion picture production expenditures contributed over $1billion to the provincial economy in 2012. The sector creates local jobs and brings revenue to many communities across British Columbia.”

    Stoping subsidies will not solve the problems of the VFX industry. Better run VFX businesses and stronger labor representation will.

    • Disgruntled says:

      1 billion contributed to the economy doesn’t mean the government gets all its tax monies back. All independent studies of film subsidies (read not financed by film/vfx industry) show they are a loss and dont pay for themselves. And all that tax money goes straight to the pocket of already rich american film studios.

      So what you’re really doing is renting an industry and not building one.

      Ending subsidies will end the nomadic temporary lifestyle we all live and the having to country hop every movie leaving family and friends behind.

    • Marcus says:

      But they are a huge problem.
      VFX is further marginalized by the subsidies. Work is artificially made dirt-cheap and as a side-effect of countries pushing and pulling workers around the globe, we lose what leverage we have left under the laws of your *temporary* place of residence.

      The later goes as much for international as well as national subsidies… in the US, labor laws differ from state to state and unions are all organized in “locals”, making it impossible to have a truly concerted effort (not to mention that there probably is no local set up to take VFX workers in Louisiana… not even sure about NY).

      The businesses are facing the same problem as they are basically shaken down by the big studios with the generous help of local taxpayers. They are de-leveraged just as much as the workers.

      Let the politicians argue as much as they want about the local benefits of subsidies… everyone is getting screwed eventually.

    • Andreas jablonka says:

      It will not help to run a better business if you still fight an unfair 49%( to take your math) rebate. How can you honestly say that? It’s naive and very full of yourself. Maybe if your us company would move you to an LA location and you would lose bid after bid because you have no leverage you’d change your tune.

  9. jonavark says:

    Oh spit. So the work IS going to India and China. D’oh!

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