May 4, 2017

Vancouver, Tax Breaks and Visual Effects

Vancouver and BC seem to be attracting a lot of attention from the New York Times recently, and it always seems to involve tax breaks and movable money.  Here’s the latest:

Movies, always the realm of fantasy, are now further removed from reality than ever. … But while visual effects’ role in movie making is growing, its presence in Hollywood is shrinking.
One factor behind these companies’ failure is a raft of tax-incentive programs that have popped up around the world in an effort to lure cash-starved VFX production companies — and their high-tech jobs and movie glamour — out of California. The chief destinations, at the moment, are London and another even more expensive city: Vancouver, British Columbia. …
The evolution of the industry — with computers and software growing cheaper, new workers entering the market and barriers to entry steadily lowering — only made that competition worse.
Then came the tax incentives. The practice of dangling tax breaks to attract film production is nothing new, but the fiercely competitive bidding for VFX work makes the industry especially receptive to this pull. And these companies, meanwhile, are especially attractive to the governments that court them … London and Vancouver have been the most successful. …

Vancouver, even more than London, has relied on aggressive subsidies to build its VFX boomtown. Beginning in 2003, British Columbia created a labor-based tax incentive that at its peak, when combined with a federal film program, added up to a staggering 58 percent tax refund for all visual-effects labor costs incurred by movies using local workers. The credit has since been reduced to 53 percent, but it’s still one of the world’s most generous …

It’s worth pointing out that most of the visual-effects artists I spoke to — in Los Angeles, Vancouver, London and elsewhere — say they enjoy the international nature of the work. Bob Wiatr, who worked at Sony Imageworks before moving to Vancouver, remembers that when he was beginning his career in the 1990s in Hollywood, the industry was all “white American males”; now he has colleagues from Mexico, Germany, Australia and South America. “It’s like a whole world in one place,” he says. “There’s always something to learn from someone else.” …
He’s right to wonder whether London and Vancouver will keep their places atop the VFX heap for long. Yes, the Oscar for best visual effects has gone to companies based in London for the past four years, and British Columbia, which has invested just over $2 billion to support the film industry since 2003, is now home to 28 visual-effects houses.

But Kevin Klowden, an economist at the Milken Institute in Santa Monica who has been studying the visual-effects industry for years, cautions that it might not last. His opinion is that the two cities’ fates may diverge. London already had a strong talent pool, even before the “Harry Potter” films and the tax relief, making it easier for a strong network of companies to develop. And its tax rebates are funded by the British lottery, a stable source of money that is less subject to political whims. Vancouver, on the other hand, “has always had a hard time supplying enough local talent,” Klowden says — and its generous subsidies could easily be changed or removed by any new government that doesn’t want to hand millions of dollars to movie studios every year.

Full story here.

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