There are lots of claims out there right now regarding the film tax credit issue, so here is some information to help you separate the wheat from the chaff.
First, we at the Canadian Taxpayers Federation (CTF) haven’t been entirely precise on the issue. In recent columns, we noted that the Saskatchewan film tax credit allows movie companies to receive between 45 and 55 per cent of their labour costs from the Saskatchewan government.
That part is true, but we should have noted that the federal government also has a film subsidy program that pays up to 25 per cent of labour costs.
In other words, a film company could spend $100,000 on wages in Saskatchewan and receive as much as $55,000 from the provincial government and as much as $25,000 from the federal government. The industry has suggested no film ever manages to max out both subsidies, but even if a film received a quarter of the maximum ($20,000) from the government, that would still be $20,000 more than what most other businesses receive. After all, the vast majority of businesses receive no taxpayer-funded subsidies for their wage costs whatsoever.
Second, the bold claims of economic benefits ‘created’ by the tax credit are also questionable.
Some film industry proponents claim the $100 million paid out through the tax credit over the past decade has created $623 million in economic activity. Government data suggests the volume of production costs is closer to $500 million, but let’s go along with the industry’s figure for a moment.
What the film industry isn’t including is the additional $110 million in funding the provincial government has provided to the industry over the years through other funds; such as money for the Regina sound stage.
That means $210 million in provincial government funding and $623 million in economic activity. In other words, 33.7 per cent of the economic activity from the industry is driven by provincial subsidies. Throw federal funding into the mix and the percentage would climb even higher.
You may have also heard claims about ‘all the money the industry pays in taxes,’ yet the province has noted that of all the money paid out through the ‘tax credit,’ 98 per cent of it was paid out in the form of a grant while only “two per cent was an actual credit against taxes paid in the province.”
The industry would likely retort by noting that Sask workers employed in the film industry also pay personal income taxes, but what industry doesn’t have people paying income taxes?
Finally, some have suggested Saskatchewan needs to keep the film industry subsidy as everyone else has one. Proponents of the subsidy even circulated a map online which shows every state in the U.S. as having a film tax credit.
However, according to the Motion Picture Association of America, North Dakota, Delaware and Nebraska do not have film tax credits. Idaho is no longer funding its tax credit and Nevada and the District of Columbia have no ‘significant’ government incentives in place for the industry.
It’s true that a majority of U.S. states and Canadian provinces have gotten into a bidding war with tax dollars to attract the movie industry, but that doesn’t mean it’s right. Governments shouldn’t subsidize businesses, they should instead leave those dollars in taxpayers’ pockets and let people decide for themselves what they want to do with their money. Some may choose to support the film industry by buying more DVDs, others might choose to support it industry by investing in a film or two.
The possibilities are endless, but it should be taxpayers, not politicians and bureaucrats, who decide such how their money is spent.
Colin Craig is the Prairie Director for the Canadian Taxpayers Federation.