Ontario Makes Cuts to VFX Subsidy

You’ve probably seen this news story on your Facebook feed.   The Ontario government has made a cut to the VFX subsidy.  If you work in Toronto, you should definitely check it out and read the whole thing. The article states:

“Elsewhere, the Ontario Computer Animation and Special Effects Tax Credit, which is used by foreign and local producers to offset the cost of producing animation and visual effects locally, often for big-budget tentpole movies, is being reduced in value from a 20 percent to an 18 percent refundable tax credit for expenditures incurred after April 23, 2015.”

A 10% cut to the subsidy is nothing to take lightly. This underlines the danger of building an industry that relies so heavily on government handouts. The Liberals were under pressure to deliver a budget that wasn’t in a deficit so they had to cut spending where they could.

The government argued that the lower dollar will more than make up for these cuts. In July of last year the dollar was worth around 94 cents US, it’s now sitting around 82 cents US. The reason why the dollar dropped so quickly is that the price of oil has crashed, and the strength of the Canadian dollar is tied to the price of oil. From the article:

The province said the lower Canadian dollar “is making Ontario an increasingly attractive location for productions and is increasing foreign investment in the film and television sector.” The 2015 budget document noted Los Angeles producers, who are flocking to shoot in and around Toronto in 2015, “have benefited significantly from the drop in the Canadian dollar relative to the U.S. dollar because their Ontario production costs are paid in Canadian dollars.”

Ontario isn’t the first province to cut their subsidies. Last year Quebec slashed their subsidy from 25% to 20%, and it didn’t seem to affect their VFX industry at all (at least, it looks that way from here).

The subsidy issue is a difficult one. They creates a very unstable industry. Governments can be fickle, raising and lowering subsidies depending on external factors that are far beyond their control. It also creates displaced workers, since companies will relocate to the location that offers the best deal. Just look at the migration of work from California.

The thing that’s so difficult is that right now, everyone in Toronto, Montreal and Vancouver is benefiting from them (for now). Hard to argue against them when it’s the reason why you’re employed. I wish I had a good plan of action to recommend to you.

  • Organize a union? Unless it’s truly world wide, it would only push the work to other locations.
  • Trade organization? If you listen to the podcast I linked to yesterday, you heard an industry giant like Scott Ross say that he’s given up that fight.
  • Countervailing duties? That only makes sense for the countries that are being harmed, like the US, not Canada. Ross and VFX Soldier tried that with ADAPT, and couldn’t get enough support, even though the studios admitted that it was a clever strategy.

No, from what I can see, short of all the world governments simultaneously deciding to stop their subsidy programs, there’s no clear path to a stable industry. I would recommend that all Ontario artists save their money and plan for a uncertain future. These first cuts to the subsidies may ultimately be a minor bump or a sign that further cuts are ahead.

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