Canada's Film Industry Threatened As Goverment Eliminates Tax Shelters

by Amanda Banks, Tax-News.com, London

25 September 2001

The Canadian federal government aims to shut down tax shelters by the end of the year by closing a loophole in the Income Tax Act. Although the move is not targeted at any industry in particular, it is believed that it will hit the film industry the hardest.

Most American owned production companies invest in tax shelters in Canada when they want to make films in the country, and disputes are currently raging over whether the elimination of the shelters will spell the demise of the film industry in Canada. Some have argued that the country's low exchange rate and already favourable tax system will continue to attract foreign film makers.

A government official, who wished to remain anonymous, told the National Post: 'It is true that the film industry is the industry that has for the most part taken advantage of this loophole. The purpose (of the amendment) is to ensure that somebody cannot get a current deduction for what is in essence a capital investment.'

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