It’s an all too familiar story I post about on this blog: US studios fall in love with a government that give them free money. Governments runs out of money. US studios leave for the next sucker.
A BC newspaper reports that government officials may leave out the film & games industry for further support in the future:
An Arts and Culture Branch report created after December 2011 industry meetings, obtained by the NDP via Freedom of Information, said, “Government has taken a close look at the screen-based entertainment industry as a possible focus for the Jobs Plan, and has not found a compelling case for any additional emphasis on this sector.”
…
“Given that there is no new money, how can the government use (or) enhance its existing suite of tools such as tax credits and regulations to support the development of the industry,” said the report.
Two years ago I predicted problems for subsidized locations due to their government debts. So why is the BC government reluctant to further support the film and gaming industry in BC?
Well here’s a list of what I believe to be the issue:
- British Columbia has some big problems coming soon and needs to cut spending.
- British Columbia’s debt is exploding which may turn into a fiscal tsunami due to creative accounting.
- Credit Agency Moody’s has downgraded the financial outlook of British Columbia to negative.
- S&P has also downgraded six major Canadian banks.
Sort of funny when you consider some BC residents were boasting about the economy there in my last post. The challenges for BC’s film & gaming industry is compounded by the fact that during this time of spending cuts, it may need even more money. Here’s why:
- BC’s film industry has been hurt by bigger subsidies in Ontario and Quebec which recently doubled.
- In the last 10 years, BC has already spent $1.5 BILLION* in film subsidies.
- BC voters also recently decided to change it’s sales tax law which will make filming there more costly.
- The BC gaming industry was a recent casualty after Ontario and Quebec increased subsidies for the games industry.
*I’ve been collecting information on how much BC is spending on film subsidies and will expose this in another post.
Most independent studies show film subsidies to be a big money loser. The ones that do show a return are usually studies paid for by film commissions and US studios which all benefit from the free money being doled out. At the end of the day all you have is a race to the bottom. How many millions more should BC taxpayers give away to the US studios?
It is absurd for BC film supporters to ask for more welfare during a time of cuts. As someone against subsidies for films, what do I suggest BC should do? BC is a huge exporter of natural gas. Part of the reason they are in the fiscal hole is that natural gas prices are declining and other provinces that are increasing their film subsidies also import resources like natural gas from BC. I suggest placing a tax on those imports that counter the amount of film subsidies they offer. It raises more money for BC and immediately makes the film subsidy race a national issue that the Canadian government must resolve.
Until the subsidy race is resolved, professionals in the industry can prepare to pack up and move to the next biggest loser.
Soldier On.
VFX Soldier 
If we (speaking as a member of the BC film industry) were talking about “subsidies” here, I’d agree with you, but tax credits are not subsidies. If the work isn’t here, there is no tax credit, and no employment. We can have a healthy industry employing 30,000 people which gets a break on paying some of its taxes, or we can have no industry and 30,000 people out of work and draining the social safety net.
I know you’re going to disagree but the fact is it is a subsidy. The amount of money a producer can receive can be be more than the amount of tax that they owe. That is a subsidy. Free money.
This is very true. Also Subsidies are supposed to help an industry get off it’s feet. Not fund it for it’s entire life span. Look at other major industries in the world (forestry, transportation, technology, medical etc…) Each of them used a subsidy at some point to help start their industry. They then were able to become self sustainable without the need of the subsidy. Not the entertainment / film industry, they have become dependent on the free money.
People love free stuff. Hand out free stuff and someone will line up to get it. Hollywood studios are no different. Hand out free money to bring their production up there, and they’ll jump at it, even though Hollywood had another record box office year for 2012. The problem is, free stuff isn’t free. The money has to come from somewhere. In the states we just went through a big debate about getting the richest to pay more so others can get more free stuff. But with the BC subsidies/kickbacks, the studios are the richest and getting the free stuff. Who’s paying for this free stuff? The government? Unless money grows on trees up there, it’s coming out of the BC taxpayers’ pocket. And as Mr. Squires pointed out, BC is not getting the return for it’s tax dollars. It’s wasteful spending by government (well, what’s new there, huh?) and the citizens of BC are going to wake up soon and demand it be stopped.
A tax credit is not charging a production sales taxes on good and services purchased on location, such as hotel room taxes for cast and crew, gasoline taxes for transportation vehicles, income taxes for businesses in the locality. Anything above and beyond not collecting those taxes, but money given from the government to the production is a subsidy (re: kickback).
The picture is a bit incomplete but still a good summary here : http://filmworks.filmla.com/2012/08/15/rhythm-hues-special-effects-powerhouse-offers-insight-into-vfx-industry/
Micheal, yours is commonly held misconception about how film “tax” credits work. I, like you, once thought the same thing. But it’s simply not accurate. Taxes is the biggest misnomer in this debate. Here is a very straight forward “film incentives for dummies” post that should be required reading for anyone in the industry: http://filmworks.filmla.com/2012/03/16/runaway-production-its-not-about-lower-taxes-its-about-cash-handouts/
Can we maybe agree upon using the term “film service industry” instead of “film industry” when we are talking about the situation in Vancouver? With BC’s marginal output of original Canadian content, you simply can’t speak of a real film industry. Most companies there mainly provide services to US studios making American movies in Vancouver – chasing subsidies.
(http://en.wikipedia.org/wiki/List_of_Canadian_films_of_2012 – this is for all provinces of Canada, not only BC)
A tax credit is still a subsidy. Someone is making up that extra spending. So a tax credit or loophole, or direct payment are all subsidies. They skew the tax code and play favorites for certain industries who employ the best lobbyists.
Someone posted this on the last thread.
http://www.avaaz.org/en/petition/SAVE_BC_FILM/?fmLkRdb&pv=7
Pretty funny how it says “Save BC Film”, as if there are Canadian films coming out of Canada. Don’t get me wrong, I love “Trailer Park Boys” and all. But, past that, what other Canadian content is there?
And at the end of the day, the folks signing this petition to “Save” BC films, if successful are just propping themselves up higher for for an even further fall not to far down the road.
“3.Credit Agency Moody’s has downgraded the financial outlook of British Columbia to negative.”
Moody’s downgraded the debt rating from AAA-stable to AAA-negative. The debt is still rated AAA, just that the outlook has changed from stable to negative. As a creditor AAA is the best rating you can have on your debt holding, the outlook change is a warning.
“4. S&P has also downgraded six major Canadian banks.”
S&P downgraded 6 banks, yes, but one, Scotia, is the only ‘big 5’ bank there, the rest are small banks. Des Jardins and Central 1 Credit are actually credit unions. You also forgot to mention in the same article that S&P kept the outlook for all six banks at stable.
Later in the same article, S&P upgraded the outlook for TD and RBC from negative to stable. These are both ‘big 5’ banks.
All other issues aside. When a government gives a subsidy, isn’t that just tax they aren’t receiving, as opposed to say a grant that they’ve given a particular industry out of pre-existing gov funds. If it brings work to the country that you didn’t have before AND you haven’t SPENT any money how can you claim that 1.5 Billion as a loss (Although that’s a hell of a lot of money). Just asking questions to clarify…..
Most film incentives are subsidies directly or indirectly. It is not a reduction in tax a film production would have to pay. Most film incentives here in the the uS bring in less than .7 of what is spent. That means it would have been better for the state to simply have paid people directly and gotten more of their money’s worth. Incentives are not an investment in the films and the amount of labor employed and the income to that region never tend to live up to their ‘advertised’ amount. Tax incentives merely shift work from one area to another and studios will go to the location with the highest subsidies. This makes for a very precarious industry and job situation. (As BC is seeing)
http://effectscorner.blogspot.com/2012/08/visual-effects-tax-incentives.html
Mike, film incentives are much closer to being a grant than any tax. In addition to Scott’s post, this one should be required reading: http://filmworks.filmla.com/2012/03/16/runaway-production-its-not-about-lower-taxes-its-about-cash-handouts/
An updated database of what is available http://www.entertainmentpartners.com/incentives/
Did anyone read the article that Disney are going to make less films next year as they only made a 12.5 percent profit last year (Disney Pictures was the worst performing section of the Disney Coorporation) . They will focus on films they think has a better chance of turning a profit. So without subsidies that would mean Disney would make a loss if there finacial reporting is acurate.
So basically as the subsidies die they will make far less movies and create far less work for all. Happy Days. I will try and find the article again and post.
Worth noting too that Disney’s profit margin for 2012 took a huge hit from John Carter. And that fell more onto marketing problems rather than film-making issues. I’m sure Universal is going to be a bit more selective for a year or two after Battleship.
Actually, if the subsidies are not in place, Disney and other studios will indeed continue to make movies… they will just make movies that cost a lot less. Now, that doesn’t mean that they will take responsibility for making less expensive movies. They will still want to make big tentpole VFX laden films. They will just want to spend less…. and based upon precedence, will want to make them for considerably less once the subsidies are gone. They will not want to have less shots and they will not take control/responsibility of the films. That will fall to the vendors. And given the way the VFX vendors have acted, they will bid them even more aggressively, and lose even more money.
I was just quoting the Disney Exec who said they were going to make LESS films in there next budget cycle. And yes some VFX tentpoles but my guess is less risky films. At the end of the day less films, means less work.
Other studios have also recently seen a decrease in the number of films they ouput a year.
Making less films does not actually mean less profit, they will be smarter on the films they make. They are always answering to the share holders who just want larger profits. Anyway I digress it was purely an interesting article and only wish I could find it again.
I believe we can all agree that there are far better and more profitable ways to conduct our business in VFX . I disagree that our greatest cost is labor.. Our greatest cost for both VFX shops and Studios that employ them is MASSIVE waste. I’ve run shows where the director actually directs the VFX with the same focus they directed the movie set….AMAZING difference in cost, performane of artists, and bottom line for both the shop and the studio.
I have a pet peeve about this, although perhaps it’s more of a Freudian slip in this case. Disney probably means to say they are making “fewer” films, not “less” films. “Less” films really, when you come right down to it, means smaller, lesser films.
There will still be tremendous competition in subsidies for Disney and the other studios to take advantage of. Every studio has lowered the number of films it releases, this trend has been going on for a long time and will probably continue. What may well happen is that the hole opened up by the major studios will be filled by smaller ones.
Thanks, Scott – that’s what I thought.
Basically without market socialism the studios would destroy what remains of the VFX vendors and established talent pools, disconnected completely from their productions by sending all the work to China and India while they wait ten years for those areas to mature…. rather than adopt better business practices with the vendors that actually improve their product and bottom line. I wonder why they have not destroyed the rest of the talent associated with film production by now given that predisposition….they all still remain one of the most highly organized labor and and highest paid talent pools in the world. I beg to disagree with a grim future. i believe we are going through some of the growing pains the rest of the talent did decades ago in other forms of leverage seeking, and If it’s not profitable and full of potential why does everyone want it in their backyard? I’d like to see Scott’s idea of trade associations evolve…and although his post seems pro incentive on the surface-read. I did notice he contributed to the campaign to end VFX subsidies.
Let me make myself perfectly clear…. Subsidies are bad. They’re bad for the VFX industry, bad for the govt that is offering the subsidies, bad for the VFX worker that has to constantly uproot their families, bad for the VFX facility which has to chase the subsidy. The only group that these subsidies are good for is the Motion Picture Studio/producer.
Just what I thought..thanks Scott
I think you’re getting your “subsidies” and your tax credits mixed up with the film industry at large versus vfx. Most vfx and animation rely on a separate tax credit system called Digital Animation or Visual Effects, or DAVE for short. I highly doubt the government is going to cut DAVE, even if they do cut tax incentives for the rest of the film industry. Do a little research next time on what our industry actually uses here.
With all the pressure to cut and the debt will all variations on subsidies escape cuts?
I would imagine someone reviewing the situation and no program is 100% safe.
Thanks! This is a point I was too weary to make.
We should not forget WHO gets the tax credits or subsidies. It is not the VFX facility. For sure.
BC can and have democratically decided to raise taxes on vfx studios. Good for them.
They do not need some foreign lawyers telling them what to do.
We are all America, Canada is just the best parts of America. So if we can’t copy it we have the right to just take it.
“Boasting”?
feh. That was aimed at the blog post, not your reply. Sorry.
(I wonder what determines the indent-level for comments, as I have left three successively (including this one) by typing at the bottom-most “Leave a reply” field.)
My intended reply to the original blog post:
“Boasting”?
There is a lesson here that should bring together management, labor and government but does not, because everyone is acting in their own short term interests.
First, these are subsidies because the governments have all changed the rules to allow the sale and transfer of tax “credits” which means that studios “sell” them, in advance, as a funding mechanism. They have not, for years, been used as a “discount” on labor or services to make specific local resources more attractive.
Second, what cooler heads warned years ago has prevailed, it is another race to the bottom. When B.C. raised its tax credits years ago, production streamed out of Ontario and Quebec. Quebec responds by upping the ante, increasing the credits.subsidies to an insanely unsustainable level (60 + % if you work the books properly ) and dropped residency requirements for qualified labor. Ontario followed suit with their own subsidy increases.
The comment above, about B.C. not having a film industry but rather a film services industry is quite accurate. Although we should all have sympathy for anyone facing unemployment … and with 4 shows in town B.C. is now facing 90% unemployment in the industry
see: http://www.globaltvbc.com/bc+film+industry+grappling+with+record+unemployment+calling+for+new+tax+credits/6442788643/story.html
…but can anyone honestly say they could not see this coming, or that the only way to sustain an industry in Vancouver would be to have the government pay producers handsomely forever, Did no one think that perhaps a city where it is cloudy, grey and rains over 200 days a year, and where there is little diversity in available locations, is probably not the best place for live action film production, or that the city with one of the highest costs of living in North America is probably not the ideal place to house workers in the VFX industry when there is such a downward pressure on cost ?
Ditto for any number of tax credit locales around the world …there are logical places where businesses, any business, should be located and government subsidies are the only reason that a business would make an illogical and unsustainable choice of location.
And where does that leave the people that actually do the work, filmakers / technicians / artists and support industries. Constantly moving from place to place as governments raise and lower their subsidies – impacting families, friendships and preventing workers in an entire industry from bonding with and supporting the local communities that government is tasked to strengthen.
And the business itself suffers / because when all the major and mid-level vendors spend there time, energies and resources keeping shell facilities available in every tax credit market, moving bodies and material from place to place, there is little left for developing new ideas, new technologies or a sustainable business plan forward.
Perhaps instead of fighting tax credits / subsidies VFX Soldier should lead the way in encouraging subsidies … here is my proposal: Let’s get the State of New York to offer a tax credit to interational banks and financial institutions, where they will pay up to 60% of the bank or brokerages expenses, including executive pay, if they will just leave London, or Hong Kong and relocate their business to Manhattan. Hoe long do you think that would last before world outrage would trigger a trade war ?
At some point the folks in this industry will have to accept the simple fact that the artificial markets and “Hot Beds” for Film/VFX work created by the tax credits/subsidies/kickbacks are all on a cycle. And that cycle is either feast or famine.
It starts out looking great, lots of money flowing around, no one questions the money’s sustainable flow. It’s party time! But, when the cash flow stops, due to a variety of reasons, higher kickbacks in other areas, etc…. party’s over.
Now, if BC was a true market for Film/VFX, they would not have to worry about the lack of kickbacks coming their way. But, because it sadly, and solely exists on the back of the Canadian tax payers, the BC Film/VFX workers don’t have much of a leg to stand on.
That should be scary thing for all the folks in BC, they should want a stable, none-subsidized market to work in. But instead, are asking for even MORE money, to keep them working now.
I do get the wanting to work now, but at some point, like say….. now, those same folks will have to start to look at the bigger picture, and want a more stable market for themselves and the industry as a whole.
interesting read….
http://www.vancouversun.com/opinion/columnists/Cayo+This+film+subsidies+sequel+boring+repetitive/7824205/story.html
LA artists are accustomed to collecting un-employment after projects, I wonder if CA figured it’s cheaper than give out subsidy
haha wow that author calculates the tax payers pay almost double per person in the BC film service industry than they would if they all went on welfare.
“By my calculations, we might be better off. Even if, as the writer warns, they all end up on welfare, the cost to the taxpayer for each single individual will be just $7,320 a year. Which is a lot less than the $13,000 that, on average, we pay now to subsidize each worker in the industry.”
Rofl that was an awesome article! Has he been reading my blog? 😉
so say the film industry employs 5000 people with an average salary of $110,000 (complete average guess) that would generate $150 million a year in taxes. Purely anecdotal but just trying to put numbers to what income the BC government gets back in taxes from workers. The ubove numbers on having all those people out of work does not factor the knock on effect of the complete economy putting more business out of work that support these workers in there day to day lives.
The average salary of a BC film worker is $110,000?! Doubt it but let’s follow your argument.
You say they each pay $30,000 in taxes (mind you many of these are for individual services they use like healthcare, pension)
BC has a calculator to estimate how much subsidy a producer can get:
http://www.bcfm.ca/programs/tax-credits/fibc/ (I put $110,000 for A & B) The total federal and provincial subsidy amount is $36,000.. a net loss of $30M! If I included VFX its even more: $52,500, a net loss of $112,500,000!!!
Now let’s assume I’m wrong and you are right: The government makes money on this. If that were true why would there be any hesitation at all in increasing the subsidy? The more money you give away the more you get back. WIN WIN!
The reason for the hesitation is probably because of the math I just showed you there. The government loses money.
Wouldn’t the majority of the money vfx artists earn be spent in BC? circulating money into the local economy, and getting taxed again when they buy food and again when the shop owner does his tax return and again when he buys a tv etc etc.
Government economics does not run like your household budget.
VFXSoldier, you are doing great things, your commitment and energy is inspiring, but I really think the vfx workers would be better off pushing for unionisation and a trade guild rather than this subsidies issue.
Once the talent is organised then we would have leverage on both the studios and the government on all the issues bought up in this blog
Traveller, my understanding is people in BC drive down to CostCo in Bellingham to stock up on items like groceries and gasoline, as it’s cheaper south of the border.
http://www.huffingtonpost.com/2012/08/13/bellingham-costco-canadians-cheap-milk_n_1773495.html
Ymir, People in BC might, but I think I can safely say having worked in Vancouver, that Vancouverites don’t. (Vancouverians?)
Who the hell would drive 170km to get milk a dollar cheaper!? Maybe a few people who live on the border hop over, but if they live on the border they ain’t working in VFX
Traveller, be sure to read the bottom paragraph.
http://seattletimes.com/html/businesstechnology/2018941957_canadians18.html
Besides just milk, it’s gasoline, tires, practically everything is cheaper 30 miles away. The point is, it’s sales and sales taxes that are being spent in the U.S., not in BC. Maybe folks are buying in bulk for a group of friends? Or for resale at their own stores?
Hey VFX Traveller,
Unless the VFX professional is buying a home or big items like cars, they aren’t putting that much back into the system. As we know in Vancouver, they are not buying houses or cars. There is a very small tax contribution when buying groceries, eating in restaurants, etc, however it’s contribution does not come close to what the government is paying out.
All the savings that transplants earn goes to their bank accounts in their home country.
Sure, they rent an apartment and help their landlord, but if all the VFX professionals in Vancouver left today, all those landlords would be just fine renting to other people. In the grand scale of things it’s a relatively small industry.
Ymir, I’m not denying that people in BC do, but people working in VFX live around the center of vancouver not 30 mins from the bellingham costco, they do not drive 170km round trip to buy groceries in bulk. The article is not about vfx workers certainly not a majority of them.
P-Fi, Rent/mortgage is probably most peoples biggest expenditure, and goes straight into the Vancouver economy via taxes the landlords pay, then there is the sales tax etc etc. I don’t think it’s as small as you are making out.
Economies don’t run like a household budget, there are issues with money supply in the economy movement of money, many knock on effects. I may be wrong, but i’d like to see some a decent cost/benefit study.
Are we saying that the BC government was wrong from day one offering these tax deductions and they’s have been better off never offering them? They obviously did it for a reason
Hey VFX Traveller,
The whole idea with incentives is to stimulate an area, then after it an industry is established, ween off the governement subsidies and let the industry stand by itself. The idea being that once a company is stable and profitable they will no longer need a subsidy to be successful.
Historically the problem is that once the incentives decrease, or even fail to increase to match nearby incentives (Toronto, etc) the industry crumbles. It’s all built on a house of cards.
P-Fi. That’s true, so surely the aim now should be get the studios to cough up more of the budget to the vfx their films rely so heavily on. We could do this by forming a union and the vfx companies forming a guild and agreeing rates etc. Getting rid of the subsidies at this stage just leaves place like Vancouver a ghost town and all those tax breaks wasted. Doesn’t matter what state or country is offering what incentives if all the vfx companies are offering comparable rates. Even offsetting any government tax credits by upping their costs
Our efforts should go into that. If the VFX industry in Vancouver (or anywhere) is a one legged man, then the tax credits were the makeshift crutch holding him up, we should be concentrating on building a nice bionic leg, not kicking the crutch out from under him
$110,000?. Where did you get that figure?. I’ve worked in BC’s film industry for 25 years and never made anything close to that. Try cutting that in half! It’s a misconception that everyone working in filmed entertainment makes lot’s of money. For most it’s seasonal and there can be long periods between jobs. You are only.paid when you work.
If you make $100k in LA you’d better make at least $130k in Vancouver to keep the ball rolling, this city is über expensive.
Quite a number of those workers are from US and other countries so may not be paying Canadian taxes or at least not same level as local citizens. Canadian government paying out over $300 million in incentives. Even in your numbers they’d only recoup 1/2. Hard to get unbiased numbers in many cases.
Please point me to where I can find out how not to pay the full level of Canadian taxes, short of setting up a company in the Caymans and somehow convincing a vfx company to pay me through it. I’m very interested since when I worked in Vancouver I paid all the taxes everyone else did.
I find it very hard to believe your general VFX artist is gaming the system
It’s best to check with an accountant licnesed in Canada. Peter Tsouras of Montreal is a good one.. In Montreal most artists were able to get a full refund on CanadianTax I know for 2006-8 Laws may have changed and Peter can let you know. There were a few things you could not do to quailify like Enroll your kids in school or take advantage of the health care. I spent very little during those years in Canada. I wired all my money to Bank of America. BC laws are different. I had to open a BC bank account in later years. I still wired all my money home and spent very little in Canada. I filed a BC Tax return but deducted all that on my USA return as foreign tax paid. All in all I spent very little in Canda. The income tax I paid was reasonable and it’s ironic that some of that when to the American Studios. Most Americans don’t even purchase items in Canada. They open PO boxes in Bellingham Washington and get their mail there or things they bought for themselves on the American Amazon.com. This is legal if you are not reselling it or leaving it in Canada as most are not. The saving s there is substantial.
The studios only get the rebate on eligible labour costs. So only eligible crew who are classed as BC residents and file and pay taxes in BC so anyone who does not the government does not rebate on the those costs at the rebate percentage.
As for those who claim it has little impact on the local economy then lets be conservative on what they put back. And anyone who knows Vancouver knows this is pretty cheap lifestyle;)
Lets suggest someone on a 12 month contract.
Rent – $1200 a month = 14.400
Utils/phone/internet – $150 a month -= 1800
1 Starbucks a day – $5 = 1825
Lunch = $10 = 3600 isn
Groceries = 100 a month – 1200
Entertainment/Alcohol = 4000 a year
Public Transit Pass = 1200 a year
Total = 28,025 + the income tax.
Dave, Thanks for replying. So it is possible, interesting. I’m English so it might work differently for us. I will certainly investigate if I go back to work in Vancouver though
Cheers
Dave most of the people are there for longer terms then a few months..in that case you have to pay full taxes in Canada. Also assuming that most people does something because you do so does not make it a fact…I’ve been working in other countries as well and sorry i was spending a lot..and most people were as well.. Also explain me what money does the canadian governement lose by giving taxe credits…if those companies were not there, those jobs would not exists… that money would not be spent in Canada…if each artist spend only 1 dollard..governerment still make money….not much but they do…
@chrisian, the goverment doesn’t get all that money back. As other have pointed out if a person makes $100,000, the then studio gets about $33,000 from the government due to the incentives (could be more or less depending on the qualifications of the film.)
According to ww.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html the govenrment of BC will collect $7635 in taxes off of that $100000.
As for your number of $28000, the government will only collect a small percentage of that based on other people claiming some of it as income, like the rent, and through sales taxes. For example, using your numbers, the BC government doesn’t get 14,400 for rent. They get 5.06% on the first $37,568 of taxable income. So, if someone claims that rent money as their income, like the landlord, they only get about $729 off of it.
If the BC gov is lucky, they’ll get about $3000 off of that $28000. So, let’s see, that means they collect about $11,000 back from spending $33000. Doesn’t sound like a good deal to me. So, unless the Federal government kicks in that difference it’s a loss for BC.
where did you get 300 millionin rebates. Is that VFX or the entire industry? I am not being snide. Its purely based on if that is only VFX then I know for a fact that BC has not done $700 million in vfx work in a year which is what would be needed to get that rebate.
There is a big difference between Tax Credits and Subsidy’s. A Subsidy is ‘free money’ and a Tax Credit is not. No matter how much both the Federal and Provincial government would like you to believe B.C.’s filmed entertainment industries, which employs indirectly over 30,000 individuals, does not rely on Subsidy’s
Hi Peter,
So is it safe to say you are for tax credits (a reduction in taxes owed) but against subsidies (government money given to a company beyond their income tax amount)?
yes. my point is there is a difference.
Given your own definition the scheme for film in BC is a subsidy. We’re debating semantics but I think your misinformed on how it’s implemented.
We are talking about cash being handed out to us studios beyond their taxable amount.
Peter, then why is the “tax” credit refundable? And why does the PDF fact sheet on the BC film commission site say this: “The credits are applied to reduce tax payable, and any remaining balance is paid to the corporation.” Because that sure looks like free money to me. And since, let’s see, ALL of the major studios don’t pay corporate taxes in BC (they are California entities after all), virtually every single one of those credits is coming in the form of a refund check. Peter, are still honestly insisting this is not a subsidy?
It’s true both a Tax Credits and Subsidies are financial incentives. But a ‘Tax Credit’ is not a public expenditure were as a Subsidy is.
A Government Subsidies take money from one person and gives it to another, a form of financial assistance just like Welfare. A Tax Credit is the amount you can deduct from your taxes.
Peter,
Look at the bc government budget documentation. It lists the film subsidy as an expenditure – a subsidy, or as you call it: welfare.
Peter, I think you are missing the point. If the production company has $1 million in film tax credit but only $100k in corporate income tax, then the $900k in excess film tax credits that it has once the tax bill is paid are then REFUNDED as cash from the public coffers–i.e. money collected from the BC taxpaying public that it is now giving to the production company. This is not an argument we are making, its just a fact. Yes, this is a somewhat complex issue for those who have not spent a lot of time looking into it. I myself once thought the same thing you are now saying. But was flat wrong and so are you. Call BC FIlm & Media. They run the program….if anything, they are 1000% biased in favor of keeping and expanding the program….yet even they will tell you the exact same thing we are. This is a cash handout of free money from the taxpayers to a production company, usually one set up by a US studio. Again, not an argument or an opinion…..just the facts. We can argue over whether that’s good or bad….but that IS how it really works.
“As someone against subsidies for films”
Against ALL subsidies for films? Then why are you even *in* the film industry?
“Until the subsidy race is resolved, professionals in the industry can prepare to pack up and move to the next biggest loser.”
Don’t you mean the biggest winner? The entire industry has been moving around out of financial necessity since it’s inception.
Hell, the major reason studios sprang up in Hollywood in the first place was so that they didn’t have to pay Edison to use his equipment in New York, and it was easier to film in LA weather. It was a pure financial decision.
If you are opposed to the film industry because of it’s ability to pick up and move to environments which make it easier to film, then I’m sorry no one has ever told you that is indeed the entire history of cinema, but there you have it. That’s the way it is, that’s the way it’s always been and that’s the way it will continue to be in the future.
Sorry.
Hey Steve,
Comparing the industry from over 100 years ago, to the industry today is kind of pointless. It wasn’t until the “Rogues” getting away from Edison 100 years ago, moving to California, did we have what became the current film industry today.
Once that was established, the film industry grew in California over the next 70+ years. Then around the 90’s, there was a slight trend of filming outside of California. These projects could have been done in state, but because of the cheaper labor and overhead costs of filming in places where the currency was much, much weaker than the dollar.
But, now the current trend has less to do with the currency offset, but the amount of free money offered by location. London, Vancouver, and New Zealand are not cheaper places to work or live than Los Angeles. Not buy a long shot.
This is a new trend, not something that has been around since the industry’s inception. But, please share your thoughts.
“Then around the 90′s, there was a slight trend of filming outside of California.”
Ever seen Lawrence of Arabia? The Bridge on the River Kwai? Butch Cassidy and the Sundance Kid? Star Wars? All made outside of California. All made before the ’90s.
The historical revisionism that this website seems to promote runs along the lines that “film-making has always been endemic to California, and attempts to relocate it are unjust”. Say what you want about the latter half of the argument, but the first part sounds as ridiculous as when Bill O’Reilly goes off lamenting the decline of “traditional America”
http://www.huffingtonpost.com/2012/11/16/jon-stewart-slams-bill-oreilly-traditional-america_n_2143614.html
Movies have always been made outside of California. Hell, the technology was invented in France by the Lumières. Should all film production move back to France from all over the world? Even if it was desirable, it’s simply not possible, which is why the fight over subsidies is a pointless one. For now, Canada’s a great place to live, it’s a great place to work. People are great, society is safe, schools are safe, people aren’t running around with guns. That might change tomorrow, but for now, if it’s good enough for Mark Wahlberg, maybe you should try it.
http://www.hollywoodreporter.com/news/mark-wahlberg-canada-restore-film-398637
Steve, yes…filmmaking has always been done all over the world. But, for the most part, before the 1990s it was almost always for creative reasons: i.e ALL of the films you listed as examples. Lawrence of Arabia shot in Sri Lanka, because it looked like flipping Thailand (the setting) and practical considerations made it the better option than Thailand itself. Ditto Lawrence of Arabia in Morroco or Star Wars in, what–Norway for Hoth or Tunisia for Tatooine or the Redwoods of NorCal for Endor???? Yeah, again, all creative. Post 1990s, Battle Los Angeles shot in Louisiana because A: for creative reasons similar to Lawrence of Arabia or; B: because of free money from film tax credits that are converted into lots of cash to pay for almost a third of the movie? Imma go with B.
All three of the original Star Wars movies were shot primarily in the UK (Elstree) partly in order to access the subsidy available at the time (the Eady Levy). Alien, Aliens, Alien3, Superman and Superman 2 for the same reason. Krull, Conan, Red Sonja, the list goes on. Episode 1 (shot at Leavesden) made use of the sale-and-leaseback system which was available in the later 90s/early noughts. But even further back filmmakers were going to places because of the cost: Dune in Mexico City, Baron Munchhausen in Cinecita, David Lean shot all those winter scenes for Dr Zhivago in Spain (in the middle of the summertime!).
I am a US citizen but I currently work in Vancouver. I find it extremely ironic and hypocritical that Canadian employees around me are clamoring about this “Save BC Film” petition. The main reason why BC has been thriving recently is because of tax breaks. How can they be so vehemently for tax breaks, yet get so upset that another city/region will be a threat to their lively-hood. Simply stated…more tax breaks are not solution, they are the PROBLEM.
The problem is Canada doesn’t have a truly indigenous film industry, we simply don’t have the population to support one and because of that our Federal and Provincial Government(s) don’t in any real financial way support it. We are simply a service industry that relies on ‘forgiegn’ production. With that said, obviously, any threat to the livelihood of individuals employed in it causes alarm. No matter what, who, when or where, Canada needs a Federal Government that supports it’s own filmed entertainment industry and understands how viable and profitable it can be.
The Canadian government has tried to support it. But it doesn’t have enough financial investment like the USA. Basically Canada has 30 million people and America has 300 million people. That’s 10x the population.. Thus a greater financial investment.
Here’s a list of Canada’s investment into the film industry:
http://www.pch.gc.ca/pgm/em-cr/evaltn/2008/prt3-eng.cfm
Can anyone here clearly explain with evidence whether this has any impact on specifically vfx subsidies in Vancouver and if so, what proportion?
Ive read a number of articles about it, none of which make this clear.
I was in Vancouver for 10 months last year on decent money, and when I left I took about 6% of my gross salary with me. The rest was spent or went on Tax, insurance, rent, beer, travel, weekends etc. I may not be typical but many others lived as I did- spend spend spend. Those on better salaries than me usually spent more and lived larger, and lots of friends were waxing the big money they made at weta as well, not just cash earned in BC.
For BC to lose money on my time there they would have had to have paid out almost my entire salary in incentives to have my job(s) there and then some. I don’t know the numbers and don’t really want to debate it but I find it very hard to believe my time there was a financial loss for them.
A U.S or U.K., N.Z. whomever, Producer called W Production comes to B.C., teams up with a registered in British Columbia production company called X Productions and form, under the guidelines of B.C. Film / Telefilm, an ‘official’ Co-Production. Together W & X Productions form another registered in B.C. incorporation called Y Production Inc. which hires the crew and produces the picture. Y Productions is eligible for the Tax Credit not W Productions. If they don’t do the work here they don’t qualify. It’s not as simple as just coming here and getting free money.
Wow, the stupidity of having a debate about tax credits. Keep on debating while we get all the productions instead (Ontario–moved here 4 years ago)–and the Billions of Dollars–instead of BC. Idiots.
If we are idiots for debating about tax breaks, then what does that make you for thinking the same wouldn’t eventually happen to Ontario?
Aw, it’ll never happen there! Psh.
/Sarcasm.
Suddenly working in movies is like participating in the world cup. Different city every 4 years… Only we don’t get paid millions of dollars. The studios do, though. Yummy taxpayer dollars.
😀
Not saying it’s good that production is going east but it’s always been a sort of transient occupation that seems to move every so often back and fourth between B.C. and Ontario. How many people have worked with crew members that moved to B.C. from Toronto because there was no work there?.
Reading this is deja vu.
Via New Mexico.
Yet our film incentives seem to persist at getting movies filmed here the attempts to lure in VFX have gone nowhere. My suggestion to those in BC who may loose their jobs is to begin to realize once VFX pulls anchor there to hijack some life rafts and abandon ship. You dont have to follow these studios on their downward spiral to Davey Jones’ locker. Maybe one hope we could adopt is to see more productions localized. Local markets and small yet much more stable facilities that dont seek world domination. It’d be nice to see more VFX facilities go against the grain and even become rogue in some ways. Become voices against whats happening and try to shatter standard business practices…I dont know? Its pretty dismal for VFX in NM these days yet the hopes we can see a small facility here do great things is strong in my mind. It wont happen through incentives in my mind anymore but will take brave innovation…
From New Zealand
While the film-makers received $267m of subsidies between 2004 and 2011, they spent more than $1.9b in New Zealand, according to the Ministry of Business, Innovation and Employment. This includes spending on staff, catering, flights and hotel accommodation.
Mr Joyce says the return on taxpayers’ money was “slightly positive” in terms of a direct return to the government. The extra spending in New Zealand generated slightly more tax revenue than the subsidies cost.
“We got back more than we put in.”
How do we know this? From work being done as part of the Government’s review of the film tax subsidy. Mr Joyce declined to issue the officials’ reports, saying they are part of a package soon to go to Cabinet.
NZ government grilled for tenuous Hobbit job claim after $NZ67m subsidy
http://if.com.au/2013/01/15/article/NZ-government-grilled-for-tenuous-Hobbit-job-claim-after-NZ67m-subsidy/TVILLYPXTM.html
I think every gov’t used the subsidy incorrectly…
From supply and demand point of view, gov’t subsidy had created lots of vfx suppliers in the market, and without increasing the demand, it had drove the price lower and lower, it only hurts the artist as skills are getting more common….
Subsidy should be applied to to local film makers only, so they can afford high end vfx on their local projects…..
As of now, tons of fresh bloods are put to work due to lack of local artists, quality goes down, and price goes down….
In short, our industry does not need gov’t involvement, it’s doing nothing but making us uproot our families, as BC artists might find out soon.
In my 18 yrs in this business the only times I had to fight to get paid were in Canada…looks like little has changed. Same old story right before Christmas, large sums owed on an American production….. and the labor dept helping the production by delaying any enforcement while the employees are strung along. http://newsle.com/person/damianpetti/19502602?article=56010721
I take it you never worked for Ring of Fire then Dave? Their policy is to pay you after 4 months or whenever they feel like it, whichever is later. Unless of course you stand up to them 🙂
Ring works on a contract with a 90 day billing cycle. I hear they are sometimes shamefully late on that as well. Artists sign up knowing this though and are all considered 1099 contractors. Shops have gone under in the USA with artist unpaid, but our labor laws are fare more strict when it comes to getting paid. It;s been my experience American studios take advantage of their “relationship” with the Canadian government. When we were owed 1.3 million in 2007 it took two years and only after much publicity for the studio to offer 40% thru the “negotiations” between them and the labor dept of Quebec. We had a day or two to accept or decline or it was all we’d get. This is just one of the side effects of living in a world where corporations are in bed with those that govern.
D-I-G-I-T-A-L D-O-M-A-I-N
As far as I can think, in no other country has hundreds of workers been laid off in a single company with no notice, no compensation, no back pay or vacation and benefits accrual.
No other country ever. (even meteor/quebec came up with some money for employees eventually).
The big problem in the Southern California industry is cost, mostly from an obscene property boom that means that a crack shack in venice with wafer thin dry-wall costs $1M. Everyone was chasing the property dream in socal, including CG artists, so now the cost of land and substandard constructions are clinging onto to dreamworld valuations of yesteryear, so artists can’t afford to live a reasonable standard, business pay rentals through the roof, municipality taxes are based on fairlyland propery valuations of yesteryear. Well, nice if you want to live in neverland, but forget doing business in socal on this basis …
Don’t stop believin’
Hold on to the feelin’
Streetlights people
[…] [3] This era could be coming to an end: https://vfxsoldier.wordpress.com/2013/01/14/bc-subsidy-high-wire-act-hit-by-fiscal-tsunami/ […]
Disney reporting on 2012 profit …… My question is if they only made 12.3 percent profit if the subsidies go away for, shoot and vfx then they are likely to make a loss no???
“We are constantly looking at eliminating redundancies and creating greater efficiencies, especially with the rapid rise in new technology,” said Disney spokeswoman Zenia Mucha.
In terms of profit margin, Disney’s studio is the least profitable of the entertainment conglomerate’s four major product divisions. The studio had a profit margin of 12.3 percent in 2012.
Disney and the other studios have already been reducing the number of film they produce every year and have been for several years. The studios are no longer doing only films. They are entertainment empires so their films aren’t the only thing they have going. Their most profitable tend to be large vfx and animated films so that’s a large portion of their profits. Marketing is now one of their biggest expenses.
This is the same logic people try to use when they fear vfx going union here in the US. They’ll be shipping jobs out of the country. Hello? They’ve already been shipping jobs out of the country even as a non-union industry. Will remaining a non-union industry prevent more. No.Likewise studios are already cutting back on films with incentives. Continuing with incentives will not stop them from reducing that number further.
If all of vfx companies charged them zero would they make an infinity number of films? No. If all vfx companies charged what it actually cost, would they stop making all films? No. The answer lies somewhere between.
If they in fact had to pay all vfx costs maybe they would put a little more effort to keep their increases to the budget (changes, additions, etc) to a minimum as many do for television. They have a line producer and 1st AD to make sure the live action stays on budget but they simply allow the vfx without budget supervision because they’re not directly paying for everything.
Should vfx artists and companies be responsible for footing the bill for a film so others may profit from it? Should tax payers be paying to help a profitable company? That’s the issue being realized by many people around the world. The corporations are trying to squeeze every dime out of the workers and tax payers and avoiding paying taxes.
In the UK they’re closing children’s hospitals and other services due to lack of government money but some of the million/billionaires living and earning money in the UK aren’t paying their taxes. That’s why UKUncut came to be. And that’s why there are people banding together in the US and other countries as well. People are starting to get frustrated with politicians who have sold them out and are taking the money the people have had to pay as taxes and simply turning that over to companies for private profit.
Workers wages have stagnated for most of the last 20 years and much of the profits for companies have been diverted to CEOs, management and their boards. 30 years ago CEO’s made 30 x an average worker. Today that figure is over 300 x the wages of their average worker in the US. Even though Disney didn’t make a huge profit last year, they gave their CEO a 20% pay increase. He’s now making $40.2 million. If companies really wanted to lower their costs they would outsource the jobs of the CEOs.
Disney quote on fewer films …….. So again if they make fewer films does that not mean there will be less VFX shots overall to produce and therefore us all fighting for less and this is WITH subsidies so WITHOUT them does this not make things worse? Again I AGREE we need to do something to give some power back to the VFX studios so lets not all get pissy.
Cuts are most likely at the studio, said two of the three sources, where the strategy has changed to focus on fewer films and rely more on outside producers such as Steven Spielberg’s DreamWorks studio, which finances its own films and pays Disney a fee to market and distribute them.
Just for peoples information on the benefits in BC and the income versus out going. This goes against many numbers put up here the this website and I am sure many will jump on this but het it shows another angle on the numbers that some here like to doubt. Enjoy and this is my only post so wont reply
http://www.scribd.com/doc/121494475/Kurt-Bruun-BC-Film-Incentive-Analysis
I’ll quickly respond but as usual these reports never indicate how much money in tax revenue is generated from the spending. I’ll put up a post today showing how much money is being lost.
On Mon, Jan 21, 2013 at 11:34 AM, VFX Soldier
1998 to 2011
Total Foreign & Domestic Film/TV Spent
$14,339,434,333
Total Tax Credit’s Paid Out
$1,264,000,000
Total $ Injected in BC Economy After T.C. Paid Out
$13,075,434,333
??? Are you implying that 100% of the money spent goes directly into the BC economy? Every single dollar (loon?) is spent and nothing is spent on anything outside of BC or saved? I’d like to see any reasonable document showing that. I know when I worked in Vancouver a few years back that was certainly not the case. Don’t forget it’s easy for studios to set up shell companies for movies and to appear to be in a given location whole most of the funds are shifted to their real location.
not implying anything.
The how about adding the amount the BC government collect off of that 13b? Basic break down on what the studios get back on employing workers is this:
Cost of a worker: 100k
Amount the studio gets back from BC gov: 33K
Income tax paid on 100k: 8K
Average amount of taxes collected on per 10K spent: 1k
So, how is the BC re-coping their 33k and actually making a profit? Seriously, I’ve checked all the BC government websites and can’t find a tax rate over 14%, which only applies on incom over 104k. How does it make sense to keep paying the studios?