It's been a year of quarrelsome fussing and fighting, divisive rhetoric, and bureaucratic wrangling since last year's budget brought changes to Nova Scotia's media industries.
It's been a distraction and disappointment for government, industry and the public.
No one feels as well off as we were before this exercise.
Now what do we do?
The Back Story Again (... skip this bit if you think you got it.)
The media tax credit is an industrial tool with one original purpose - it was designed to draw federal funding to Nova Scotia in the same way municipal and provincial investments in roads, leisure facilities and the like draw in federal funds. We are in a competitive process with other provinces and we bid to attract federal funding. The typical 'price' of these bids is about one third... the province puts in about $.30 and it draws the Federal funding dollar.
We're buying money. And it's on sale! How many dollars would you buy for thirty cents?
The stakes are high. This year alone the Canadian Media Fund has announced over $370 Million in funding available to the provinces (read more about them below). Adding in the available funding from Telefilm, National Film Board, CBC productions and other federal programs that can go to any province and the amount of money available approaches $2 Billion dollars.
But wait, there's more... there are other benefits to the media tax credit.
1/ It creates jobs. Whatever the number of jobs, those are the people you saw out protesting in the streets over the last year. At a time when we all agree every job maters in Nova Scotia, by definition, these jobs must matter. Don't confuse this side benefit with other labour rebates. It's a tiny piece of the pie.
2/ It draws inward private investment. There are some hooks to the tax credit system. In order to get any tax credits you must sell at market value something someone in the world wants to buy. So, broadcast licences and distribution fees from the biggest TV broadcasters, film studios and distributers in the world also come along as inward investment. The government says that the number is not $160m per year, even though that's their number, but they've never argued it's zero. At a time when Nova Scotia is nearly drained of capital and available investment and the banks are simply not lending to local business, every available investment dollar is crucial. This is good money.
3/ The product. The product created - the shows - is diverse and of all kinds of value to Nova Scotia. The series my company produces, Hope For Wildlife, does a couple things beyond employing 30 families over 8 years so far: it finances the rescue and rehabilitation of over 3,000 injured and orphaned animals each year; it's on the air in 100 countries, showing Nova Scotia's people, places and values to the world; that draws in tourists and people with similar values who want to live in such a wonderful place; it shares our stories; it creates a product that sells - an intellectual property, a modern business beyond our traditional resource extraction industries, that's part of our economic future.
Much has been said about how Tax Credits work. The media tax credit was created 20 years ago by the Liberal government. It's been supported by all three parties over the years and has been much emulated - by other provinces, by the Federal government and by states and countries world wide. Taxation as a tool for economic development is complex but it has several main features that are easy to understand. It's accountable, transparent, risk-free, and open to anyone. It is not decided in a pick-a-winner style like the old crony capitalist systems that have caused us so much pain as we watch government throwing tax money at pet projects that invariably fail.
Tax credits are not profits. They don't go to corporate welfare or the pockets of the well to do. They are used to finance getting productions made. As Walt Disney said, "we don't make shows to make money, we make money so we can make more shows." Success in media industries is survival, the ability to tell another story, make another show.
In 20 years not one project that earned media tax credits failed to deliver what was promised. This incredible stat is so because of the system itself. The companies take all the risk and don't even qualify for tax credits until they've delivered everything promised plus not one, not two , but three levels of independent audit. At a time when we want more audit accountability for bad deals 100% of media tax credit deals are audited and insured. Even then it may be years before the tax credit comes through - it's a very cautious process and that's a good thing.
So, now what do we do?
The astonishing answer is nothing.
All the work's been done. All the required decisions were made. The heavy lifting and crucial conversations are last year's news. The new systems are in place and everything's working fine.
What? You didn't hear that? No, of course, that's because it's all working. Just like it was for the last 20 years when exactly no one in Nova Scotia said, 'you know the problem is... all those TV shows we're making..."
Here's the thing. It's just like the recent pharmacare story. Shortly after the last budget government heard from the media industries. They realized quickly a miscalculation was made and they quietly put the tax credit back in place. It's now called the digital media and animation tax credit as you can see here in the Finance departments 'tax 101' site and you can read all about how great it is from government here.
Unfortunately in the crossfire, a lot of bureaucrats got involved and, as is often the case made more of this than needed to be and we ended up with TWO systems - two complete sets of rules and overhead - where before we only had one. Classic. The second system puffed up the NSBI and fell under the new department of business instead of simply a tax credit administrated by the finance department's systems already in place and working well over 20 years.
It's taken a year of work to see the unnecessary extra costs, time and trouble of this boondoggle and moreover to see that it doesn't work. It's not attracting the federal money it was designed to attract as explained by the feds in very plain language to the government and in the national media. The feds chided the NS Liberals for spreading misinformation. More charitably, I think they just tried to fix things and got it wrong.
So, now a year on, the answer is simple. Consolidate the media industries under the single, simple, tried and true accountable system that is in place and working well. Call it the media industries tax credit. Then substantial savings of money, time, effort and PR can be had by shutting down completely the 'incentive' program at NSBI that everyone agrees is not working.
The solution requires no new laws, no rules, no new programs or overheard, no changes to existing rules - in fact, no effort at all because government did the hard work last year and got the program back on track as a competitive tool of great economic value. It's working perfectly and flexible for the future. Animated and digital online programs are using the system happily. And no one - not the public, the government or industry - has a problem with any of it.
It's a solution that's done. It was done last June. It saves money, creates jobs and investment, follows best practices and international standards, fits with new federal liberal efforts and makes all the protesting go away tomorrow. Will it save the industry or any companies? Will it create new successful companies? Who knows. There's a lot of work to do in a challenging and changing world. But at least we can get back to work and try.
On of the many beauties of the media tax credit is, if it doesn't work, if no new business is created, it doesn't cost anything and if it works it really works - returning 3 to 6 times the outlay that does happen until after the economic benefit is in the bank.
Here are copies of some of our letters to government explaining the situation. We send a couple letters and calls a week. They never respond.
Letter to Business Minister April 2, 2016...
I am writing today to share that the CMF (Canadian Media Fund) has this week announced over $371m in available funding to support film and TV production. This is only one of many federal programs including CBC, NFB, Telefilm, Rogers Fund, the Federal Film Tax Credit and others totalling over $2B in Federal funding available this year.
These funds are accessed exactly like all other Canadian federal funding for highways, convention centres, shipbuilding and other infrastructure - the provincial governments bid to attract this funding.
Over the past 20 years Nova Scotia has built up systems to attract our fair share (about a proportionate 2% of funds growing at double digits each year) of available CMF funding.
Last year when the NS government proposed cutting the film tax credit the government stated incorrectly that federal funding would still come to Nova Scotia anyway. Valerie Creighton, head of the CMF responded in correspondence and in the national media correcting the NS government and saying that federal funding in the creative sector, like all other federal funding, was contingent on competitive provincial participation.
This is one of many media pieces where the CMF head explained to NS gov how federal funding works and pointed out that they contributed over $39m in inward investment to Nova Scotia.
This year, without competitive participation from the NS government it is now likely that the majority of all this available federal funding, amounting to 3 to 4 times the required provincial investment will by-pass Nova Scotia.
It seems astonishing that a government that jumps through so many hoops to attract other federal funding would purposefully pass up these opportunities.
Citizen letter to Premier April 3, 2016...
DHX announces big contracts using NS film tax credits this week...
I am writing today because there seems to be a lot of misinformation out there about there not being any more refundable tax credits for film and TV in Nova Scotia.
In fact, there will be more refundable tax credits this year in Nova Scotia than ever before. They are available to research and development, digital media and animation industries for film and TV production. All the rules, regulations and rates remain exactly as they have been for years. And they work! (with R&D being by far the most expensive and unpredictable with by far the most nebulous results)
It's only if the output of the TV show or drama is 'live action' that it does not qualify for Nova Scotia's smart and competitive refundable tax credit system. If you can see the actor it's disqualified. If you can only hear their voice it's good to go for Nova Scotia tax credits.
In another release this week DHX has been commissioned to produce a new series that combines animation and live action with the BBC's children's broadcaster. It's a great opportunity to draw in foreign investment, high skill creative good paying jobs, new knowledge and assets, create valuable intellectual properties and multiples of available federal production funding.
If this series were to be produced in Halifax how it would be handled? The animation portion getting access to the tax credit and the live action portion dipping into the new incentive fund? Who is to say.
Why we now have two parallel systems for film and TV - one for animation and digital media that is clearly working well, and one for live action that is clearly broken - is an on-going mystery... but clearly paradoxical and unsustainable in the world of modern multi-platform media and the politics of Nova Scotia.
During the initial talks with MLA's last April I was told that the main reason to get out of the Tax Credit was because big companies like DHX were 'draining' the provincial treasury. Yet in the end it was only the big companies that remained to access the ongoing tax credit system and only the small, independent and guest productions that got excluded. Now we are running two parallel and redundant systems: one that works for the big companies like DHX and costing more than ever and one that doesn't work for small, independent, local and guest productions that employed the majority of film workers.
What explanation can be given in the modern media age why R&D, digital media and animation industries can access film tax credits but live action - with access to the same talent, broadcasters and federal funding - can not and has been ghettoized to wither in a system that does not serve its purpose? How is this sustainable? What coherent policy, plan or goal does it serve? What actual cost saving is achieved? What is the opportunity costs in lost production and fundamental distraction, negative imaging, and bad press?
For Mr. McNeil to continue saying we're 'not going back to tax credits' is deeply misstating the fact that, in the end, we never left tax credits and they are still the most valuable and best working tool for bringing economic development and investment to Nova Scotia... just not if the output of your production is live action... otherwise... good times ! Congratulations DHX on all recently announced broadcast commissions, especially the ones to be produced in Nova Scotia using our GREAT refundable tax credit system.
Writing about life, citizenship, and Nova Scotia.