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### Viewing cable 05HALIFAX101, NOVA SCOTIA UPS FILM TAX CREDIT

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05HALIFAX101 | 2005-04-18 20:08 | 2011-04-28 00:12 | UNCLASSIFIED | Consulate Halifax

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS HALIFAX 000101

    SIPDIS

    STATE PASS USTR

    E.O. 12958: N/A
    TAGS: ETRD EINV ELAB PREL CA
    SUBJECT: NOVA SCOTIA UPS FILM TAX CREDIT

    ¶1.  SUMMARY:  The government of Nova Scotia has recently
    revamped its film tax credit in an attempt to win back some of
    the production contracts that have been lost recently to
    competition from other provinces and the United States.
    However, although this tax credit increase will likely stave off
    some of the competition from other Canadian provinces, at least
    temporarily, the rising Canadian dollar and continuing pressure
    from other provinces and the U.S. make the future of the Nova
    Scotia film industry potentially a story without a happy ending.
     END SUMMARY.

    ¶2.  Employing some 2,100 people and bringing in well over C$100
    million per year for the province, the film industry is a
    lucrative business which the Nova Scotia government hopes to
    encourage.  However, provincial film industry revenues decreased
    from C$137 million in 2003 to C$113 million in 2004 with
    estimates for the 2004-2005 year declining yet again to less
    than C$100 million-the first time production has fallen below
    C$100 million in the last decade.  Direct employment in the N.S.
    film industry has dropped 22 percent since 2001.

    ¶3.  Facing pressure from industry leaders and provincial NDP
    opposition leader, Darrell Dexter, Premier John Hamm announced
    on March 8 that he was increasing the N.S. film tax credit from
    30 to 35 percent for productions located within the Halifax
    Regional Municipality and from 35 to 40 percent for productions
    in areas 30 kilometers (19 miles) or more from the city core.
    Hamm also introduced a frequent filming bonus of 5 percent for
    companies that shoot two films in the region over a two-year
    period and gave the Nova Scotia Film Development Corporation
    C$600,000 to be used for program planning in 2005-6.

    ¶4.  These increases are largely in response to similar tax
    credit increases and frequent film bonuses that were introduced
    in other Canadian provinces, particularly in Manitoba, B.C. and
    Ontario.  Although Nova Scotia was the first province in Canada
    to introduce a tax credit system, virtually every Canadian
    province has since adopted the incentive program.  Ontario and
    B.C. announced increases in their tax credits in December 2004
    and January 2005, respectively, with both provinces increasing
    their tax credits on domestic productions to 30 percent and the
    foreign tax credit to 18 percent.  Manitoba's tax credit
    provides 35 percent on eligible labor costs, and includes a
    frequent-filming bonus similar to the one Nova Scotia recently
    announced.  Thus, when compared to similar increases in other
    Canadian provinces, Nova Scotia's incentive increases are not
    exceptional and seem largely reactionary.

    ¶5. Although these tax credit changes might serve as a stop-gap
    measure to recover some business lost to Manitoba in the past
    couple years (Manitoba's revenues increased from C$62.8 million
    in 2002 to C$107 million in 2004), the downturns witnessed in
    Nova Scotia's industry are largely reflective of wider trends in
    the Canadian film industry.  By year's end in March 2004, total
    film and television production in Canada dropped from C$4.92
    billion from C$5.03 billion-with decreases in both foreign and
    domestic production.

    ¶6.  COMMENT:  With the rise of the Canadian dollar, the SARS
    outbreak in 2003, consumer and producer preference for reality
    television over drama and "made-for-TV" movies, as well as
    funding cutbacks for major American and Canadian broadcasters,
    it seems that Nova Scotia's problems may not be isolated.  This
    may be a story without a happy ending.  END COMMENT.

    HILL

`