Dix’s film subsidy plan is better politics than policy
Part one of two
The move may prove to be good politics, but beefed- up film subsidies announced Tuesday by NDP leader Adrian Dix are bad policy.
Even if you believe it’s worth pumping hundreds of millions of provincial tax dollars year after year into this or any other industry — I don’t — this film subsidy is problematic. The way it was set up by the NDP government of yore, then bolstered hugely by the Liberals guarantees it can’t build an industry that stands on its own.
The problem is that hundreds of millions are given each year to mostly foreign film studios that do not, in return, sink a single cent into lasting investments in this province. And companies with no skin in the game have no loyalty to B. C. Their decision- makers don’t own the facilities that will sit idle if they bail to another jurisdiction, and it’s not their families who’ll be left struggling.
Don’t take my word for this. Look at what has happened over the years. Competing jurisdictions race to the bottom, offering ever- larger incentives to lure productions from someplace else. When this happens — as it did, most recently, in Ontario and Quebec — the studios pull out and move on with no thought for the economic dislocation they leave behind. At least with subsidies to other industries — most of which I also consider bad policy — the recipients must build a mine or a plant or something substantive in the province in order to get their handout. The prospect of walking away from a big investment at least gives pause for thought when they’re offered more free money to go somewhere else.
Every time I write about this issue I’m assailed with emails accusing me of not knowing the difference between a subsidy and a tax credit, as these handouts are euphemistically and inaccurately called. So let me underline that B. C.’ s film policy is and always has been a subsidy, even under the most basic definition of the word. Even if these were real tax credits — reductions in tax bills if certain criteria are met — they’d still be considered subsidies by such authorities as the World Trade Organization.
But these aren’t even real tax credits — they’re what government and industry spin- doctors call “refundable tax credits.” As such, they’re subsidies by even the most limited definition — cheques in the mail, mostly made out to companies with zero or near- zero tax liability in B. C.
And they’re substantial. The subsidy is now 33 per cent of what foreign productions spend on wages in B. C. and 35 per cent for domestic productions.
Dix would raise this to 40 per cent for both — which works out to $ 10 an hour of government handout for every British Columbian who earns $ 25 an hour working in the industry.
Campaigning politicians are sparring over how much Dix’s promise will cost. He says it’ll be $ 45 million a year more than the $ 200- plus million spent in 2011/ 12 and the $ 300- plus million budgeted for future years by the governing Liberals. The Liberals dispute this, saying the new promise will add $ 75 million to the tab. The truth is, nobody knows — it depends on the extent to which studios respond with continued or additional B. C. productions.
But I do think it’s a safe bet that Dix’s assertion that spending this extra money will generate a $ 93 million revenue return is bogus.
Governments — or, in Dix’s case, governments- in- waiting — are always spinning numbers like this to justify their dipping into the public treasury, and the numbers are always suspect. For one thing, they’re inevitably based on assumptions that may or may not play out as expected. More significantly, they don’t reflect the reality that the subsidized activity is certain to displace other activities. These are unknowable, and therefore unmeasurable. But if the provincial government didn’t spend about $ 50 per capita on film subsidies this year, somebody — either taxpayers who’d be able to keep this money in their pockets or the government itself if it went ahead and collected the tax revenue anyway — would spend it somewhere else. And this spending would have some impact on the economy, though no one knows if would be more or less than the impact of how it’s spent now.
NEXT: Columnist Don Cayo evaluates tax subsidies offered to other B. C. industries.