Michael Geist is wrong about the NS film credit

University of Ottawa law professor Michael Geist is Canada’s best-informed commentator on communications and technology law, but in his Toronto Star column yesterday, he stepped outside this field to opine on Nova Scotia’s Film Tax Credit fiasco.

Citing an unreleased Ministry of Finance study that delivered, “a sharply negative verdict” on Ontario’s film tax credit, Geist argued Nova Scotia is doing the right thing by scuppering its credit—a move that will gut filmmaking in our province.

Geist2Geist is a brilliant guy, and his surveillance of internet law does the country a great service. But he’s been snookered on this issue.

Discovering that finance bureaucrats oppose film tax credits is like discovering codfish oppose factory freezer trawlers. These credits cost far more than they produce in direct corporate income taxes, so they are natural targets for beancounters who spend their careers fighting off demands on the public purse.

Geist didn’t actually see the “study” he cites; he saw a slide deck bureaucrats prepared in an apparently unsuccessful attempt to persuade the Ontario cabinet to ditch its credit. I  wouldn’t call it a study, so much as an all-out screed against the program.

The slide deck makes a few points that are obvious to everyone. Film production in Canada goes up when our dollar is low—as do automobile, lumber, and canola production. Much film employment is project-based, and therefore temporary—as is employment in construction, consulting, and the entire arts sector.

Of course the deck highlights what everyone acknowledges: that only a small portion of the money paid out under the credit is recouped in direct corporate income taxes paid by the recipient companies.

The deck falsely condemns the tax credit as an inefficient way of supporting film production, on grounds its certification process is somehow “burdensome.” Most economists praise the efficiency of using taxes to encourage beneficial activities (by lowering them), and discourage harmful activities (by raising them).

What’s missing from the Ontario Finance Ministry’s analysis is any effort to quantify—or even analyze—the broader benefits of the film and television industry, and the impact the tax credit has on it. It leaves basic questions unasked:

  • What is the value of sales taxes production companies pay the on the Ontario goods and services they purchase?
  • What is the value of sales and personal income taxes paid by film industry workers?
  • What is the value of sales, personal, and corporate income taxes paid by suppliers on goods and services they sell to production companies?
  • What is the value of tourism generated by fans drawn to locations featured in favourite movies and TV shows? (This may not be a big deal in Ontario, but ask that question in Chester, NS.)

Then there are the intangibles:

  • How different would Ontario and Toronto be without film production?
  • What value has the Toronto International Film Festival added to Toronto’s reputation over the 39 years of its existence?
  • What is the Floridian value to a city of being known as a centre for arts and culture?
  • Would the Ontario cabinet consider closing the Royal Ontario Museum or the Toronto Symphony Orchestra on grounds memberships pay only a fraction of actual costs?

The film and television production industry is highly mobile. It can and does follow currency fluctuations and favourable tax regimes. As Geist correctly points out, this risks pitting rival jurisdictions against one another on a race to the bottom. But it is disingenuous to suggest little old Nova Scotia abandon subsidies on principle, while provinces with larger populations and stronger economies continue to pass them out.

Jurisdictions constantly compete for economic activities—with grants, training allowances, payroll rebates, land giveaways, low-interest loans, and favourable regulations. If Finance Ministry officials can find a way to stop these this, they will deserve the Nobel Prize in Economics. They’d better implement it worldwide, though, because if the ban applies only in Canada, footloose industries will simply shift elsewhere.

Nova Scotia is a small province with a large debt on the cusp of a demographic disaster. We have a cadre of well educated young people, thanks to excellent universities that lure students from places like Ontario. Film and television production is one of the few ways we’ve found to retain some of our most interesting and creative young people as they enter the workforce.

It will be a tragedy if the blinkered advice of beancounters persuades us to toss the industry aside.

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