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Posted: Wed., Feb. 19, 2003, 5:26pm PT

Canada on a runaway train
Gov't ups tax breaks for foreign prod'ns


MONTREAL -- Canada is fighting to lure Hollywood filmmakers back over the border by offering increased tax breaks for foreign producers.

But there's bad news for local TV producers -- the government has cut its contribution to the Canadian Television Fund from C$100 million ($65 million) to $49 million a year.

The tax credit for foreign producers shooting in the Great White North increases from 11% to 16% of labor expenditures in Canada, effective immediately, Finance Minister John Manley announced in Ottawa on Tuesday evening.

Move comes a week after anti-runaway production legislation, aimed at projects with budgets under $10 million, was re-introduced in Washington D.C., with 46 sponsors in the House. That action came on the heels of Chicago Mayor Richard lamenting that "Chicago" was shot in Toronto and tweaking the feds over the lack of a U.S. incentive program.

Jo Powers, spokeswoman for legislation co-author Rep. David Dreier (R-Calif.), said, "The Canadian action is yet another reason for our legislation to go forward as quickly as possible."

Kathy Garmezy, director of government affairs for the Directors Guild of America, added, "This reallreally underlines how valuable the production business is."

Competition for U.S. production has been spurred in recent years by a variety of foreign goverenment incentive programs, spurred by the notion that production spending generates seven times that amount of economic activity.

The enhanced Canadia film tax credit replaces the tax shelter program shuttered by the government last April. The government was under intense pressure from the Canadian production industry -- which saw activity flatten out last year for the first time in a decade -- to bring back the shelter or sweeten the credit because of increasing competition from Australia, New Zealand and other countries that have been siphoning off Hollywood's runaway production.

Canada can afford to be generous. Its economic growth is the best of the Group of Seven industrialized countries, and it has a $4.16 billion surplus in the current fiscal year. "We are a true Northern Tiger," Manley boasted in his budget speech.

"I think this new credit will make a difference for producers who're considering shooting in Europe or elsewhere," said Montreal film lawyer Sam Coppola. "It's significant. A lot of these films are $30 million-$50 million projects. So that tax credit represents a lot of money."

Canadian producers were less enthused with the government's surprising decision to cut its contribution to the Canadian Television Fund, one of the main motors of the local TV industry.

Last year, the fund helped finance 583 productions representing 2,800 new hours of Canadian programming worth $521 million in production activity.

The Canadian Television Fund estimates that the reduction of $16 million per year will result in around 60 fewer productions and a potential drop of $54 million in production.

"It's a lot of money for producers to lose," said Lorraine Richard, president of Montreal-based producer Cite-Amerique.


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