Tax Shelter Era: When Canadian Cinema Got Popular

“There are now many Canadian films, but there aren’t too many good ones are there?”

The above quote was spoken in 1980 by then-Prime Minister Pierre Elliot Trudeau at a black-tie film industry event. Whereas Canada’s filmmaking apparatus could have barely qualified as a cottage industry half a decade earlier with only three Canadian narrative feature films produced in 1974, the business had exploded by the end of the decade with 70 Canadian features produced in 1979, not too far behind Hollywood which produced 95 that same year. What happened? Ottawa’s tax man had built a shelter and seemingly everyone with spare cash to burn was looking to get in on the lights, camera and action.

There had been failed attempts to jump-start the Canadian film industry before including a British “quota quickie” scheme mounted in 1930s Victoria by American producer Kenneth Bishop and earnest efforts by the Canadian Film Development Corporation (CDFC) in the late 60s-early 70s to fund and promote quality Canadian content. While some titles like Donald Shebib’s Goin’ Down the Road and Ted Kotcheff’s The Apprenticeship of Duddy Kravitz had scored some measure of critical and box office success, the vast majority of productions failed to make much of an impact, especially against the steady stream of quality American product streaming across the border at the time. This was, after all, the era of The Godfather, Serpico, Chinatown, One Flew Over the Cuckoo’s Nest, etc. Even the CBC seemed reluctant to showcase local cinema as out of 2000 films broadcast on CBC Toronto between 1967-1974, only two were Canadian!

With low investments and even lower returns, it seemed like the CDFC was pushing a rope to nowhere. A shift in attitude was required and the gears did indeed shift in 1974 when the Capital Cost Allowance was bumped from 60- to 100% for several Canadian industries: oil/gas, rental housing construction, and yes, film. This effectively meant that anyone investing in a Canadian film could use the entire amount to reduce their taxable income, and perhaps even make a profit too!

The criteria to count as a “Canadian film” was as follows: At least one of the producers had to be Canadian, ⅔ of key creative personnel (writers, directors, etc.) had to be Canadian and 75% of production/post-production had to take place on Canadian soil. Tick those boxes and the tax relief was yours.

Production picked up almost immediately and the results can be seen in such films as Shivers (1975) and Who Has Seen the Wind (1977), but the doors really blew off the hinges when Michael McCabe became executive director of CDFC in 1978. He was unlike his predecessors in that he was less concerned with a traditional sense of British/French-inspired “Canadianess”, but was instead focused squarely on the art of the deal and bringing Hollywood and its stars north across the 49th. This along with the Canadian Securities Commission allowing smaller blocks of shares to be sold for films which allowed more middle class investors to put skin in the game, caused a gold rush in the Canadian film industry never seen before or since.

Suddenly, all manner of American stars could be spotted on film sets in Toronto, Montreal, Calgary, and Vancouver including Elliot Gould, Henry Fonda, Shelly Winters, Tatum O’Neal, Jamie Lee Curtis and Canada’s own expatriates Donald Sutherland, Christopher Plummer and Margot Kidder. “There was so much more money than scripts” notes producer Pierre David in the 2017 documentary, Tax Shelter Terrors. Seemingly anything could be filmed as long as aforementioned criteria was met.

Yet for all the talk of a “Canadian” cinema, most couldn’t be blamed if the films being produced were mistaken for American product. After all, The Changeling subbed in Vancouver for both Upstate New York and Seattle and Prom Night raised the stars and stripes over its Onatrio school location. The truth of the matter was that these films were being produced with international export in mind and being American just sold better. After all, we Canadians are rather similar to our American cousins anyway in terms of geography and visible infrastructure. Annoyed outcries by the cultural elite over this faux Americana resulted in more films essentially being set “nowhere”. Eagle-eyed viewers might recognize street names and local references (a “Moosehead” beer is served in Nova Scotia-shot My Bloody Valentine), but any direct mention of setting was strictly prohibited. This syndrome continues to this day for many Canadian productions. The smash-hit sci-fi series Orphan Black didn’t dare openly reveal its Canadian setting until the end of the final season!

But setting squabbles started to matter little when it became apparent that most of the films being produced under the tax shelter scheme just weren’t any….good. Turkeys like Dirty Tricks (1981) and Circle of Two (1979) sank without a trace despite the star power of the likes of Suzanne Sommers and Richard Burton. It’s difficult to say why exactly that for every The Grey Fox (1982) there were at least ten stinkers like Nothing Personal (1980), but the simple fact of the matter may have been that there was two much money and not enough adults in the room serious about making quality films.

As the 1980s dawned, Canadian cinema started to gain the reputation of a national embarrassment rather than a serious artform or even industry. With so much dreck on the screen and perhaps even more that never made it that far (the dentists started to realise film was not a steady source of profits and decided to invest in mining instead), the government made the decision to reduce the CCA to 50% and to re-brand the CDFC as Telefilm Canada, with a revised focus on funding films with guaranteed space in Canadian primetime. The tax shelter era was over.

Despite the several successes and launched careers of the era, the Tax Shelter times are often dismissed as a failure in the context of Canadian film history. However, I firmly believe an additional chapter is warranted as I believe that without the tax shelter era, regions of Canada would not enjoy the healthy and fruitful film industries that we do today.

It was the glut of film production in Canada during that period that allowed so many craftspeople like camera operators, prop masters, makeup artists, film editors to gain experience that would prove invaluable when Hollywood would begin to take advantage of a favourable exchange rate in the 1980s. Vancouver would host The Neverending Story, First Blood, Bird on a Wire and the long-running 21 Jump Street TV series. Toronto could be seen in The Fly, Police Academy, and Night Heat while Alberta would also get in on the action with such titles as Superman III and Unforgiven.

The tax shelter films are a mixed blessing to be sure, but their legacy also includes a healthy and vibrant industry that I am proud to be a part of (I have worked on and written about Vancouver films for nearly a decade now). So I hope we can think of the Tax Shelter era not just in terms of the gold rush of money it moved around, but of the livelihoods, opportunities, and even entertainment it helped to create.


1979: Reading the Tax-Shelter Boom in Canadian Film History, Peter Urqhart, 2004
Home Movies: Tales from the Canadian Film World, Martin Knelman, 1987
Film in Canada, Jim Leach, 2011
So Close to the States, Michael Dorland, 1998
Tax Shelter Films, The Canadian Encyclopedia

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