Monday, October 27, 2008

Producers angered over tax rebate changes


Oct 22, 2008


Producers are up in arms over a move by the Canada Revenue Agency that could shrink their tax-rebate cheques.

Canadian producers who have had their tax-credit applications randomly audited by the country's tax man in recent months complain that they are now allowed a maximum 10% cap on claims for producer fees, with a further 10% write-off for corporate overhead.

That's alarmed producers, as many have long recorded a 15% or even a 20% write-down for producer labor costs, against corporate overhead, when filing tax returns in search of tax-credit rebates.

Canadian producers privately insist tax-credit applications have typically started out with a loose 10% producer-fee claim to secure acceptance from analysts at the Canadian Audio-Visual Certification Office, which greenlights tax credits on behalf of the Canadian Heritage department, and the CRA, which reviews federal and provincial tax-credit claims before it issues refund cheques.

At the same time, producers insist their costs often surpass 10% of a project budget, and allowance was often made for that in tax-credit applications.

But, in its latest audit rulings, the CRA appears to be saying it will only allow producers to breach the 10% cap in "exceptional circumstances," according to sources close to the negotiations with the CRA.

A CRA spokesman says the agency has no direct comment on its current talks with indie producers to resolve the fee dispute.

"However, I can tell you that the CRA works closely with the affected stakeholders and is always exploring opportunities to improve the delivery of its programs and services," the spokesman adds.

But Donna Leon, a producer with Ottawa's Genuine Pictures (A World of Wonders), sees the CRA as the villain in this saga for springing the change on producers only after they underwent random audits.

"Until you get audited, you wouldn't know about it. How would I have known you have a different rule," says Leon, who wants the tax man to spell out the new producer-fee policy.

Etan Vlessing reports on the apparent tax changes at CRA, and what they mean for producers big and small, in the Oct. 27 issue of Playback.