Posted: Tue., Sep. 7, 2004, 10:00pm PT

Fear of flight
Canada grapples with its own runaway production

By BRENDAN KELLY

Canada's long-time production havens of Toronto, Vancouver and Montreal are facing some runaway competition of their own. Several off-the-beaten-track provinces now offer competitive tax-credit programs and are working hard to lure foreign and domestic producers away from Ontario, British Columbia and Quebec.

Manitoba, for instance, has a production tax credit of 35% on labor expenses. Far-flung Newfoundland offers a 40% tax credit on labor expenses. By comparison, Ontario's tax credit is 20%.

Last year, foreign production in Ontario plummeted 36%. The SARS scare had a big impact, but many industryites believe that Ontario lost shoots to other provinces that offer more lucrative tax credits.

"Ontario has to look hard at what it's doing because they have a real problem with declining production," says Guy Mayson, CEO of the Canadian Film and Television Production Assn.

But he also notes there is a limit to how many shoots will move out of the main centers. "Tax credits are definitely a consideration; everyone is always looking for the best deal. But it's also about infrastructure and getting the best crews. You're also asking, 'Can you do the project in a given place.' "

The key hubs may be under pressure, but Canada in general has been fighting an overall erosion of production business. It's losing ground to other production hotspots abroad offering more generous incentives, such as Eastern Europe, New Zealand and the U.K.

"Four or five years ago, (Canada) was in a league of its own," says U.S. telepic producer Daniel Blatt, who has shot in Montreal several times. "But that's not true anymore. It's a horserace now. The money we get to make these pictures is tight, you want to put it on the screen and you want to go where you can get the most value."

In an effort to keep Canada competitive, last year the federal government increased its tax credit for foreign producers from 11% to 16% of labor expenditures, but many in the industry fear that this is not enough to hold on to productions.

In 2003, foreign shoots in Canada were still on the increase, but growth in that area is much slower than it's been over the past decade. Foreign shoots rose 8% to C$1.9 billion ($1.4 billion), 38% of overall production in the country.

American film shoots in part have slowed because of increased value of the Canadian dollar vs. the American buck. At the start of 2003, the Canadian dollar was worth 65¢; this summer, it is worth around 75¢.

Some local producers are calling for a return of the film tax-shelter programs that were dismantled by the government three years ago. "The end of the Canadian tax shelter had a huge impact on studio production coming up here," says Norm Bacal, a film tax-credit specialist at Heenan Blaikie.

"From a studio perspective, Canada has gone from being a primary shooting location to just one of many. We're no longer competitive with the U.K. and various U.S. states have become more aggressive. The studios just point themselves in the direction of where the incentives are the best."

Read the full article at:
http://www.variety.com/story.asp?l=story&a=VR1117910185&c=1753