Press "Enter" to skip to content

updated: East Coast Animation companies speaking up against tax credit regulations

Last updated on September 19, 2010

I’m just gonna copy this one.  Hopefully that’s cool with Bruce Erskine and the people at the Chronicle Herald.  Here’s the link back to the source though, for good measure.

I’ve avoided talking too much about this, as I don’t want to incite panic, but let’s face it, things are dire on the east coast.  We all got hit by the last downturn, but I’m really not sure they CAN recover, certainly not without one of the provinces dumping a bucket of cash into the industry.  The talent pool has largely packed up and moved to greener pastures, so even if it does happen, they’ll be pretty much starting from scratch again, which is a shame.

There are still a handful of very talented folks out there, and the potential to rebuild is still there, but this is a very clear case where the government needs to sit down with what’s left of the key players and really talk about how to put some life back into what was once a thriving industry.  Frankly, the government needs to first clarify if they WANT to help at all.  Is a thriving animation industry a priority at all in Nova Scotia, New Brunswick, PEI, or Newfoundland?  If it’s not, if none of these provinces are interested in keeping their tattered animation industries competitive, then they should just call it so and let the 75 who’ve stuck around make an informed decision regarding their futures.

Here’s the article:

Animators oppose tax credit system
Policy makes it difficult for sector to compete nationally, studio says
By BRUCE ERSKINE Business Reporter
Thu, Sep 16 – 4:53 AM

Changes to Nova Scotia’s film tax credits are drawing the ire of the province’s animation sector.

“The tax credit model doesn’t work for us,” Paul Rigg, president of Copernicus Studios Inc. of Halifax, said Wednesday in an interview.

The government offers tax credits of 50 per cent or more to qualifying projects produced or shot in Nova Scotia by companies that have a permanent provincial presence, according to Film Nova Scotia. It administers the program.

In metro Halifax, the credit is calculated as either 50 per cent of eligible Nova Scotia labour or 25 per cent of the total production costs for productions, whichever is less.

Outside Halifax, the credit is calculated as either 60 per cent of eligible Nova Scotia labour or 30 per cent of total provincial production costs, whichever is less.

Rigg is a member of a new organization, Digital Animators of Nova Scotia, which opposes a tax credit interpretation the provincial Finance Department announced without consultation last summer.

That interpretation caps the credit at 25 per cent of the Nova Scotia portion of a production budget rather than the previous cap of 25 per cent of the total production budget for all jurisdictions.

The association said the previous cap had been in effect for the last 10 years.

The animators group said the change effectively lowers the cap because most animation productions are done in partnership with production companies outside the province.

“This policy reinterpretation has had the net effect of almost halving the value of the tax credit for animation productions based in Nova Scotia and making the Nova Scotia industry uncompetitive nationally,” the group said.

The organization said the animation industry has suffered severe job losses — dropping from 800 to 75 sector workers — since the change was implemented.

It wants the government to eliminate the production cap or move to a labour-based tax credit.

Rigg, whose studio has done animation for the BBC program Garth and Bev and for George of the Jungle, said 95 per cent of animation projects are co-productions with companies in other jurisdictions.

He said the narrow interpretation of the tax credit limiting it to a percentage of work done in Nova Scotia puts the local industry at a disadvantage, compared with its competition in Ontario, Quebec and British Columbia.

“This is killing us.”

Film Nova Scotia president Ann MacKenzie and Finance Department officials could not be reached for comment Wednesday.

The Chronicle Herald ran a second article, including comments from government officials.  Maybe I’m wrong, I’ll give it another read and see, but it sounds like one bureaucrat passing the buck, and another trying to chalk up the decimation of the local animation community to one guy complaining.  Am I reading it wrong?

Again, here’s the link back to the latest article.

Film N.S. head supports animators group beef
Province claims they haven’t changed tax credit system
By BRUCE ERSKINE Business Reporter
Fri, Sep 17 – 4:53 AM

The head of Film Nova Scotia says she understands why animators are upset by the province’s film tax credit system that her agency administers.

“Absolutely,” said Film Nova Scotia president and CEO Ann MacKenzie in an interview Thursday.

Digital Animators of Nova Scotia argues that a change in the way the tax credit is calculated by the Finance Department puts them at a competitive disadvantage compared to other jurisdictions, including Ontario, British Columbia and Quebec.

The department caps the tax credit at 25 per cent of the Nova Scotia portion of a production budget rather than the previous cap of 25 per cent of the total production budget for all jurisdictions, which had been in effect for 10 years.

DANS, a group representing provincial animators, said the policy reinterpretation effectively cuts the value of the credit in half, since most animation projects are co-productions that have budgets involving work done within and outside the province.

The group said the change has cut animation jobs in Nova Scotia from 800 to 75 since it was implemented.

It wants the government to eliminate the production cap and move to a labour-based tax credit.

MacKenzie said Film Nova Scotia supports the elimination of the production cap, which she didn’t think would cost the province very much and might help create more local animation work.

“I know we have lost some business, for sure,” she said.

DANS said the change has practically wiped out a sector that accounts for 25 per cent of production dollars spent in Nova Scotia annually while saving a “miniscule” 0.4 per cent of the annual tax credit paid to film and television producers.

“The loss of tax revenue far exceeds the projected savings in expenses,” the animators said.

MacKenzie said the issue was ultimately a question for the Finance Department.

“It’s their program,” she said. “We’re just one player.”

Finance Minister Graham Steele said Thursday that rules governing the film tax credit have evolved but it remains a generous incentive.

He took exception to comments by Paul Rigg, president of Copernicus Studios in Halifax and a DANS member, who told The Chronicle Herald on Wednesday that changes to the credit program were killing the local industry.

“Mr. Rigg has been talking about something for over a year now that is simply an inaccurate representation of what happened,” Steele said.

The minister said his department discovered in 2009 that the tax credit for one production had been calculated incorrectly and subsequently fixed the mistake.

“Ever since then, Mr. Rigg has been claiming a change of interpretation, (that) we’d changed something that had been in place for 10 years,” Steele said.

“We absolutely did not. An error on a single file was corrected and the industry was notified.”

With Jeffrey Simpson, provincial reporter


  1. Mark C. Mark C. September 17, 2010

    DANS has been working together for 8 months to get the government to recognize it’s error. And that is all it is, a re-interpretation of tax credit regulations that has had the (we believe) unintended consequence of targeting the animation industry BECAUSE it’s more labour intensive and creates more jobs. The traditional film industry out here is not effected at all by these changes. We’ve had numerous meetings with government officials just to give them a baseline education on the issue with mixed success. Those who ‘get it’ can’t seem to make government move fast enough to address the issue.

    Here is a link to the follow up article in today’s paper with an interview with Film Nova Scotia’s president:

    Ann knows the issue, and supports the animation industry. What’s telling is Graham Steele’s comments (he’s the minister of finance), either ignorant of the facts or spinning of the truth. Our tax credit has essentially been cut in half, and he’s claiming it’s one guy complaining about one series.

    Sad times. When I moved out here in 2000, there were 12-14 animation pros in the whole region, we’ve built this industry here for 10 years, approaching 1000 working animation employees a few years ago, we’ve done many great things we should all be very proud of, but we can’t hang on much longer.

    If this issue cannot be positively resolved soon, the industry will be officially dead out here. None of the very talented NS animation artists should remain past Christmas if this isn’t altered, they should move to other regions of the country in order to be tax credit eligible for next year.

  2. Rob Anderson Rob Anderson September 17, 2010

    Reading this made me seething angry today. In NB we are 10 days away from an election and still none of the parties have had the decency to even acknowledge there is an issue here.
    The industry isn’t big enough to register on their radar or so it would seem. There are new groups around that are trying to create a collective voice but policy takes time to change. Far more time than this industry has to survive.
    I heard this week there will be -yet another- task force created to look into the NB tax credits. That is code for we don’t really give a crap, in my opinion.
    The issues are much much deeper than this but for now, this is getting my goat the most.

  3. Shannon Shannon September 17, 2010

    This is rather troubling for me, I just graduated from Vancouver Film School and my husband and I hope to run our own companies whenever we return to PEI. This tax credit thing will screw us over, PEI already has enough trouble trying to keep people in the province due to lack of jobs, our farming and fishing industries are dying so we need IT industries like Animation and Game Design to give us jobs.

  4. Rob Anderson Rob Anderson September 17, 2010

    I think that Mark is correct as well in that the Provincial Governments don’t get the labor issue as it relates to animation. At least not NB and NS.

  5. Ron Doucet Ron Doucet September 18, 2010

    This is the most infuriating part:

    “Mr. Rigg has been claiming a change of interpretation, (that) we’d changed something that had been in place for 10 years, We absolutely did not. An error on a single file was corrected and the industry was notified.” – Graham Steele.

  6. Mark C. Mark C. September 19, 2010

    HI Jonathan!

    This is not really a case of ‘battle of the tax credits’. I assume by battle you mean the upwards escalating of a region’s tax credit in order to out-attract the business from another region?

    This is not the case. Before the government adjusted their interpretation Nova Scotia was in line with Ontario (higher than Toronto, similar to Ottawa) and in line with BC. This put all 3 major film and TV producing provinces on roughly the same level. Producer’s (the ones who get the incentive) could choose based upon their personal relations, studio reputations, geographic convenience, etc. etc. and companies in Nova Scotia were essentially able to offer similar budgets (possibly lower with a lower overhead cost) and comparable levels of crew talent.

    This new interpretation has had the effect of almost halving our tax credit when compared to those other regions, leaving NS a very poor option for a producer to help fund their production. A producer gets essentially 50cents back in labour for every dollar spent in parts of Ontario, to about 28cents for every dollar now in Nova Scotia.

    For example, if you have a large production that will put about 3 million dollars in LABOUR through a region, you would lose $660,000 going through NS instead of Ontario. What producer would make that choice?

    We’re seeing the answer to that right question now, NONE.

    This isn’t about being 5% higher than the ‘have’ provinces (though that would be nice), we could be 5% less even, which is what we would be if they just went back to the interpretation from 2008 (all other regions increased their tax credit slightly while NS dropped theirs). If we’re in the ballpark then we have a chance of doing business.

    We are basically not even in the same business right now, no producer could consider spending in this region with the incentives so high in other regions. If the government of Nova Scotia does not want to invest in an industry that brings in $4 of revenue for every dollar government spends (why do you think other regions are increasing their incentives?), then just get out of the game altogether. Tell us now that Nova Scotia is not in the ‘cartoon business’ and we can move our families and businesses to greener western pastures.

    If Nova Scotia wants to keep this industry, it needs to act NOW to keep what little is left, and set the tax credit at a rate that is at least competitive to the other provinces that offer the incentive.
    Bridgewater, Nova Scotia!

  7. Gene Fowler Gene Fowler September 20, 2010

    My whole team has been lobbying the government since 2003 about how NB went from being the most competitive province, to almost the least.

    Because the median age of New Brunswickers are 55+, whom don’t know enough about this new era of IT and watch their tax payer money closely (as they have the time). They whoop and holler for it to be spread over failing but traditional industries such as pulp and paper. This is precisely the demographic that the 4 term governments need to cater to in order to get re-elected each time. So it’s not a decision of doing what’s right for the future industries of the province, it’s about appeasing the loud mouths so that they can get re-elected and hopefully, eventually get around to solving our problems.

    The money that the government does put into supporting the industry is minimal, sure we can stretch it, combined with some super talent, but it doesn’t always win the gigs. We need to work harder than other provinces and it’s a good thing those that are left, Copernicus, Loogaroo, Helix, Cartoon Conrad, Invisible, etc. do indeed work incredibly hard and continue to win gigs based on quality of work and service. However the low hanging fruit, from companies such as Cookie Jar, whom have tons of work for us, won’t even consider us because of our uncompetitive financial benefits.

    Now if the horn blowers of the aging population wanted a topic to really holler about, they could ask the government why they’re pumping millions into community colleges and private learning institutions throughout our regions for programs that train animators and digital artists, only to have them graduate and leave Atlantic Canada to find work elsewhere.

    Support the industry first.

  8. Ken Purcell Ken Purcell September 22, 2010

    It seems incredibly unfair to me that the new Nova Scotian NDP government is targeting ONLY ANIMATED PROJECTS and has cut funding IN HALF to the animation studios, but the live-action shoots that generate jobs for only a few weeks get to KEEP their full funding! A typical animation job lasts for a year or longer (and employees pay provincial taxes during all that employment) so the government gets a big return on their investment!

    So what does the NDP have against the animation community?

Leave a Reply