Canada Increases Film Tax Breaks Despite US Objections

by Mike Godfrey, Tax-News.com, Washington

20 February 2003

In a surprise move in Tuesday's budget, Canadian Finance Minister, John Manley announced that foreign film and TV producers will now receive tax credits for 16% of eligible Canadian labour expenses, up from 11%. However, he also slashed funding for home-grown television productions by 25%, according to a report from the Globe and Mail.

Previously, the national newspaper revealed, it had been thought that the 11% tax credit, in combination with other factors such as provincial incentives, and the weak Canadian dollar would be enough to maintain interest in Canada as a film production location.

However, a rising Canadian dollar, weak growth in foreign film production as a result of the elimination of a popular film tax shelter last year, and the prospect of increased competition from other, cheaper locations prompted the Finance Minister to boost the tax credit to 16%.

The provisions contained within Mr Manley's budget have been condemned by many politicians and film workers in the United States, who are concerned about the impact that 'runaway productions' which choose to locate in other countries, are having on the US film industry.

Canada's domestic TV industry was also up in arms over the Finance Minister's decision to reduce the Canada Television Fund by $25 million per year for the next two years, according to the Globe and Mail report.

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