Canada May Drop Film Tax Break

by Mike Godfrey, Tax-News.com, Washington

05 October 2001

There was disbelief in the Canadian film industry as the government announced its intention to do away with a lucrative tax shelter arrangement which has helped build the industry in Canada, and attract US entertainment companies to the north.

Parliament is expected to end the shelter, which according to some producers can save as much as 6% of production costs, by the end of this year, and there are very real fears that American film companies will simply go elsewhere if this incentive is removed. 'We're going to have to look at the economics of shooting in Canada,' MGM's Chief Operating Officer, Chris McGurk told the LA Times.

Canadian film officials say that it is too soon to estimate how much of the $1.3 billion in annual foreign film production could be lost if Canadian Finance Minister, Paul Martin, goes ahead with his plan, but warn that Canada will almost certainly lose its competitive advantage against alternative cheap locations such as Prague, New Zealand, Australia, South Africa, and Mexico.

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