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Ottawa, July 30, 1997
1997-063

Federal Government Announces Support for Film or Video Production Services

National Revenue Minister Herb Dhaliwal and Finance Minister Paul Martin today jointly announced the federal government's intention to introduce a new program in support of film or video production services performed in Canada. The government will also extend until the end of October 1997 the deadline for transitional relief from the matchable expenditure rules announced in December 1996 for foreign film production service tax shelters.

Minister Dhaliwal said that the new program will make Canada a more attractive place for film production by complementing the existing Canadian Film or Video Production Tax Credit and by allowing a greater range of productions (usually foreign-owned) to qualify for assistance.

The proposed program will apply to eligible Canadian labour expenses incurred after October 1997. In the meantime, the government will consult with the industry to determine the most effective incentive within certain parameters. In particular, the incentive must be delivered directly to the production services provider, it must be based on the Canadian labour component of the film or video production, and it must not be a tax shelter mechanism.

Minister Martin said that this action is consistent with policies to maximize private sector investment in the Canadian economy as part of a broader agenda for jobs and growth.

Minister Dhaliwal indicated that foreign film production activity in Canada brings significant benefits to the Canadian economy and that the government recognizes that this activity has the potential to grow. In 1996, foreign film production in Canada exceeded $800 million.

"This program will help Vancouver and Toronto remain major North American film production centres. It will be a more efficient way to attract foreign film production to Canada than the privately promoted foreign film production service tax shelters that were popular in the past", said Mr. Dhaliwal.

The privately promoted tax shelters were effectively terminated by changes to the tax law which were announced in November 1996 (Finance Canada News Release 96-082), and subject to extended transitional relief announced on December 19, 1996 (96-099). These news releases may be obtained by telephoning the Department of Finance at (613) 995-2855.

In view of the proposed November implementation date for the program, the government has extended the deadline for transitional relief from the matchable expenditure rules announced in December 1996 in respect of foreign film production service tax shelters. In particular, the references in paragraph 1.(d) of the annex to Finance News Release 96-099 to "before August 1997" will be changed to "before November 1997".

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