Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 15 - Evidence - Meeting of April 10, 2008
OTTAWA, Thursday, April 10, 2008
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-10, An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that act, met this day at 10:45 a.m. to give consideration to the bill.
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Before we commence, I would like the media to kindly move on. Thank you very much for your interest and your concern on this important matter.
[Translation]
Today we continue our study of Bill C-10, a very important piece of legislation.
[English]
I will first introduce the members of the committee. I see a number of other senators here as well. I am delighted.
I am Senator David Angus from Montreal, Quebec. Also from Quebec is Senator Goldstein. To my right is Senator Meighen from Ontario, Senator Banks from Alberta, Senator Fox from Montreal, one of our wonderful esteemed colleagues, Senator Prud'homme from Montreal, Senator Johnson from Manitoba and Senator Spivak also from Manitoba. These senators are visiting, but all senators are welcome to all Senate committee deliberations at all times.
Senator Spivak: Esteemed senators.
The Chair: Yes, all senators are esteemed. We have Senator Tkachuk, a regular member of the committee, from Saskatoon, Saskatchewan. To my left, I see Senator Corbin. Your province, sir, I am never too sure which it is. You are a man of the world.
We have Senator Baker from Newfoundland, Senator Ringuette from New Brunswick, who is a regular member of this committee, Senator Biron from Quebec, another regular member of this committee. We have Senator Dawson from Quebec, and the proud sponsor of the bill, Senator Eyton from Ontario. I think that covers the senators.
I also want to introduce our efficient and excellent clerk of the committee, Dr. Line Gravel, and our parliamentary library consultant, advisor and spiritual aid, June Dewetering.
We have a large group here today, and therefore it will require considerable discipline to stay on track. It is already 10:50. We have until 1 o'clock. We have two groups of witnesses.
We are on the CPAC network. I understand CBC Newsworld is also carrying this live, either in whole or in part this morning, and we are also on the World Wide Web.
To all present and those out there in cyberspace and TV land, welcome to these hearings.
I wanted to say a couple of words at the beginning.
[Translation]
Bill C-10 is An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that act.
[English]
The name is complicated for a bill that is a huge compendium of basically unrelated items. Their common denominator is that they are amendments to the fiscal framework legislation of this country, basically, the Income Tax Act. These provisions have accumulated since the late 1990s and have been included in a single bill. Therefore, not surprisingly, some confusion has evolved, as a result of this approach. Income tax, by its nature, is highly complex, and even skilled attorneys find it difficult to locate these provisions within the Income Tax Act. From time to time, there may be bits of confusion about the law, as there have been already in our hearings. I do not want anybody to be surprised about that confusion because it is understandable.
Today, yesterday and last week, our particular focus in these hearings is not the whole bill itself, but clause 120, which has raised some controversy, again, not surprisingly. The government has introduced amendments, and successive governments have brought to Parliament — this is the first time it has reached this stage of hearings at the Senate — provisions designed to give the minister a way to determine whether films and videos are appropriate to receive government assistance.
Cogent arguments have been made that these provisions may restrict freedom of expression and violate certain fundamental norms that we all hold dear.
On the other hand, it is suggested that the intention of the government is not to violate fundamental norms but rather to find a reasonable tool for government officials and the minister, in particular, to ensure that the monies of our taxpayers are properly spent.
We have a number of witnesses this morning. Our first panel has Brigitte Doucet and Vincent Leduc from the Association des producteurs de films et de télévision du Québec, Guy Mayson and Sandra Cunningham from the Canadian Film and Television Production Association, and Sarah Ker-Hornell and John Weber from FilmOntario.
Welcome to you all.
Guy Mayson, President and CEO, Canadian Film and Television Production Association (CFTPA): Thank you, chair and senators for the opportunity to appear before you today. The two producers' associations have consolidated our remarks into our presentation and their presentation.
With me today is the chair of CFTPA, Sandra Cunningham. Ms. Cunningham is also president of Strata Films, which is based in Toronto. She is a producer of Robert Lepage's Possible Worlds and co-producer of other Canadian features, such as The Statement, Being Julia, Where the Truth Lies and, more recently, Fugitive Pieces.
[Translation]
The CFTPA works on behalf of almost 400 independent production companies engaged in the production and distribution of English-language television programs and feature films in all regions of Canada. Our members assume the financial and creative risks associated with the development of new works for Canadian and foreign audiences and provide many jobs for creative Canadian talents.
[English]
Independent producers develop projects, find the financing and hire the creative talent and crews to help turn stories into feature films and television programs. We control the exportation of rights and we deliver the finished product.
Independent producers provide Canadian audiences with a Canadian perspective on our country, our world and our place in it. Through the content we produce, we help foster Canadian cultural choices and reflect the rich diversity of this country.
The production sector also makes a significant contribution to Canada's economy. It generates each year some $5 billion worth of activity, $1.7 billion of which are exports. It directly and indirectly employs about 127,000 people in high-quality jobs. It is also important to highlight that the industry is green, having little impact on the environment.
Sandra Cunningham, Chair, Canadian Film and Television Production Association: We stress from the outset that we support the provisions of Bill C-10 that pertain to the Canadian Film or Video Production Tax Credit with one important exception. We have been working for a long time with successive governments developing some of these positive changes, and we are pleased that they may be implemented soon.
[Translation]
We are grateful to the minister for saying that she wishes to continue working closely with the industry to find a real solution to this specific problem that concerns us.
Only Canadian producers are eligible for this tax credit. The CFTPA and its Quebec counterpart, the APFTQ, are very hopeful that they will be able to work with the minister, and indeed with all parliamentarians, on resolving this issue.
[English]
Moreover, we appreciate the positive and productive relationship we have developed over the years with both government and the officials at the departments of finance and heritage. We very much wish to maintain that good and productive rapport going forward.
The minister has presented us with her proposed strategy, and as you know, she urged the industry to consider her approach seriously. The minister's proposed strategy, however, does not address our concerns directly. As such, regrettably, we cannot endorse it.
The specific provision at issue for us in Bill C-10 is subclause 120(12) on page 350. More precisely, we have issue with only a part of this subclause.
We have a serious concern in having the Income Tax Act require the minister to issue guidelines that would interpret the public policy provision contained in subclause 120(3).
If left as is, this provision effectively would provide any minister of Canadian Heritage in the future the legal power to decide unilaterally the public standard in terms of content.
Put another way, a production deemed contrary to public policy according to the standard decided by the minister therefore would be barred from accessing the Canadian Film or Video Production Tax Credit.
Moreover, such authority could result ultimately in forcing repayment of the financial support if a production is found to fall short of the standard after it has been made. Such an approach would destabilize the production financing environment by adding a layer of subjective and unnecessary bureaucratic scrutiny to funding applications.
The existence of such provisions creates financial uncertainty with lending institutions and, ultimately, undermines the benefit of the tax credit program.
It is important to remember that the tax credit program was designed to be an objective support system. Its goal is to help build corporate infrastructure in the production sector and to support the creation of Canadian content by encouraging the hiring of Canadian labour, much like the Canadian Film or Video Production Tax Credit.
The Canadian Film or Video Production Tax Credit has been an invaluable program for producers and Canadian content, and has helped grow the industry significantly since it was introduced.
If passed as is, this provision could have far reaching implications for the Canadian film and television production sector. Not only would it put the sector at financial risk, but it would also effectively run counter to a long-standing government policy that ensures that funding decisions related to content are kept at considerable distance from elected officials.
Mr. Mayson: In her statement before you last week, Minister Verner highlighted that some material is potentially illegal under the Criminal Code, such as indecent material, hate propaganda and child pornography, and that currently, no provision in the Income Tax Act or regulations excludes such material. This situation was a loophole, she said, that this provision in Bill C-10 would address.
Later in her speech, however, she also said that her proposed strategy to address the issue would reassert the principle that there is audio-visual material that may not be illegal but that taxpayers should not be expected to pay for.
We are not sure what to make of these two different messages. Regardless, it reaffirms to us the need to circumscribe to the minister's authority related to the public policy provision in an objective, transparent and predictable fashion for producers, and to hold steadfast to the long-standing arm's length policies central to all our support programs in the audio-visual sector.
Without appropriate safeguards circumscribing such authority, we are left to wonder whether, in the future, other productions along the lines of The Valour and the Horror about World War II or the Boys of St. Vincent, which criticized the Catholic Church and the sexual abuse of children by priests, would be viewed as worthy of support under the tax credit program. To be clear, we do not object to having a public standard that determines what types of productions may access the Canadian Film or Video Production Tax Credit program. In fact, we all agree that minimum standards must exist.
However, we highlight that since the tax credit was introduced in 1996, a standard has been in place in the regulations, and it has worked well. That standard already excludes a host of production types, including pornography. I assume logically that child pornography would be caught by these already existing rules. We point out that a multitude of other public standards and enforcement mechanisms also exist in Canada. First, there are the film classification systems in each province. The Canadian Broadcast Standards Council is an independent, non- governmental organization that administers standards established by its members and addresses complaints related to programming through adjudication panels comprised of industry and public sector representatives.
Moreover, we have arm's length federal corporations like Telefilm Canada and the Canadian Television Fund that provide a high degree of oversight to ensure that public standards are respected. As the minister underscored in her statement, we have the Criminal Code of Canada.
Producers who qualify for the tax credit with a project they submit, however, do not receive the funding immediately. In fact, they usually only receive that money some 18 months after the production has been shot, when they file their corporate tax returns. As such, they must obtain a bank loan against the estimated tax credit.
Having subjective public policy criteria in the tax credit program, in particular such criteria that could be applied after the production is shot, could undermine seriously a bank's ability to assess the financial risk associated with such loans. As we know, banks are in the business of minimizing financial risk and maximizing returns. No bank loan against the tax credit typically means a project will not be made.
It is imperative for the production sector that the Canadian Film or Video Production Tax Credit remain an objective and, we emphasize, predictable public support program. Any notion of public policy subjectivity that raises a possibility that certification of a Canadian production could be withdrawn after a production is completed would be devastating for the sector and would place at risk all the financial partners who come together to bring a production to fruition.
As such, we ask the Senate to consider recommending amendments to those provisions in Bill C-10 related to the public policy provision of the Canadian Film or Video Production Tax Credit as it stands before you. We brought material to be filed with the clerk that summarizes our minimal recommended changes. We suggest paragraph (b) of subclause 120(3) on page 346 of the bill on public financial support be amended to read as follows:
(b) public financial support of the production would not be contrary to public policy. For greater certainty, "contrary to public policy'' shall refer to any unlawful content proscribed in the Criminal Code of Canada.
A subsequent small amendment would eliminate the reference to the need for guidelines to be drafted in this area because the Criminal Code would override that need.
Senator Dawson: Do you have the French version of your amendment? Could you or someone else read it so we know how it is expressed in French?
Do you have the French version of that amendment? It is important.
The Chair: Senator Dawson, order, please. We would have provided it but it has not been translated yet. We do not have the French version.
Please continue, sir, with your presentation.
Mr. Mayson: That is the conclusion of my presentation.
The Chair: Mr. Mayson and Ms. Cunningham, it is always helpful to the committee when concrete recommendations are provided. Thank you.
We will continue with the second panel.
[Translation]
Vincent Leduc, Vice President of Zone3, Chairman of the Board of Directors, Association des producteurs de films et de télévision du Québec: Mr. Chair, my name is Vincent Leduc and I am the Chairman of the Board of Directors of the Association des producteurs de films et de télévision du Québec as well the Vice President of Zone3, a production company. With me today is Brigitte Doucet, Deputy Director General of the APFTQ.
We appreciate this opportunity to present to you today the AFPTQ's position. Our association represents 140 companies, or the majority of Quebec's independent film and television production companies.
Before I turn the floor over to Ms. Doucet, I would just like to say that we are very impressed by this gathering and will endeavour to do the best we can.
The Chair: It is an impressive gathering because of our well-known guests.
Brigitte Doucet, Deputy Director General, Association des producteurs de films et de télévision du Québec (APFTQ): Mr. Chair, regarding the public policy amendment in Bill C-10, we understand that it stems from concerns originally expressed by the Liberal government and later taken up by the current Conservative government.
We are mindful of the current government's desire to allocate public funds responsibly and in compliance with all laws and with the Criminal Code. However, the wording of the bill has raised three concerns for the Canadian film and television production sector.
First, we are concerned that the Minister of Canadian Heritage would have complete discretion to interpret the guidelines, which in turn raises concerns about the stringent application of the guidelines in a manner perceived as a form of state censorship. Even if the minister proposes to develop these guidelines in concert with the industry, their content could be amended at the whim of the Canadian heritage minister, without the industry's input.
Second, we are concerned that uncertainty surrounding the securing of a federal tax credit could adversely affect the relative stability of production companies and further weaken them; the fear of losing funding that the government had initially promised to provide could prompt certain producers to decide not to go ahead with a valid project at the first hint of controversy, even if certain scenes were justified by the script.
Furthermore, if there is any risk at all that funding could be withdrawn after production is completed, banks may no longer want to fund certain productions or may demand additional costly insurance.
Third, we are concerned that the industry would view it as somewhat unfair if foreign producers filming in Canada were eligible for tax credits without having to conform to the notion of public policy. After all, these same Canadian taxpayers would be the ones funding foreign films that, if they were Canadian productions, could be deemed "contrary to public policy.''
Mr. Leduc: That is why, to our minds, the CFTPA's proposal addresses our concerns. If the Department of Canadian Heritage feels that it is important, in order to properly administer the federal tax credit, to set criteria that go further than the Criminal Code, working with all industry stakeholders, we would be happy to be part of an advisory committee that could address these issues, so that a consensus is reached on the criteria the minister wants to introduce.
We thank you for your attention and naturally, we are open to discussing in greater detail any concerns you may have.
The Chair: Thank you very much, Mr. Leduc and Ms. Doucet.
Are we to understand then that you agree completely with the presentation of the previous witnesses?
Mr. Leduc: Yes, absolutely.
The Chair: And the same goes for the amendments that they recommended?
Mr. Leduc: Yes, without question.
The Chair: Thank you very much.
[English]
Thank you for keeping those presentations crisp. We move now to our third group.
From FilmOntario, we have Ms. Ker-Hornell, Managing Director.
Sarah Ker-Hornell, Managing Director, FilmOntario: Thank you for inviting us to participate in this committee. I am the managing director of the screen-based industry consortium, FilmOntario. Joining me today as a member of our board is John Weber, President of Dufferin Gate Productions and Executive Vice-president of Production for Peace Arch Entertainment Group.
FilmOntario is a private-sector consortium with 30,000 members comprised of companies, producers, unions, guilds, banks, legal firms and organizations within the Ontario screen-based sector — film, television and interactive media. We represent over $1.5 billion in direct-spend economic activity annually.
Honourable senators, we have consulted our membership and are here to speak to aspects of Bill C-10. We are interested, specifically, in the subject of tax credits for Canadian film and television, or CanCon. Bill C-10 proposes to empower the Minister of Canadian Heritage:
[Translation]
. . .to refuse to grant a tax credit for certain film and television productions for which public financing is considered contrary to public policy.
[English]
They are refused after the projects are financed, produced and distributed in the marketplace.
We do not support this proposal. It raises two alarms for us and our members. The first is the issue of censorship and the second is the calamitous business climate that this potential censorship would create.
There has been and will be much discussion on the issue of censorship for obvious reasons. It is alarming that this bill purports to codify in the Income Tax Act the power of the Minister of Canadian Heritage to decline retroactively certification of a film or television production for which, in the minister's view, public financial support would be contrary to public policy.
As pornography is already excluded from eligibility for the tax credit in the tax regulations, the minister's guidelines presumably will cover "offensive'' productions, which do not constitute pornography for purposes of the Criminal Code but are nonetheless objectionable to the minister. The minister and the bureaucracy will base their retroactive decision on as-yet-unknown guidelines that are not regulations. Therefore they do not need to be tabled in Parliament and can be changed at any time at the pleasure of the minister of the day.
This situation would pose an impossible hurdle for the business of content creation. I will explore with you now the calamitous business implications of the current language used.
We have heard assurances from government at these hearings that the proposed changes would have a minimal financial impact on the industry going forward. The government admits that they have arrived at this conclusion, according to the Assistant Deputy Minister of Cultural Affairs, Canadian, Heritage, Jean-Pierre Blais, after speaking "with some in the industry only: The group I spoke to was hesitant.''
The retroactive component would mean that any number of projects from the past five or six years can be affected and can be required to refund their tax credits. In most cases, refunding tax credits is an impossibility.
Further, when asked by Senator Ringuette if they had done an economic impact study on how these proposed amendments in Bill C-10 would impact the industry and employment volumes in advance of proposing this bill, the response was no.
What the government would have discovered, had they chosen either of these paths, is that producers require reasonable certainty to raise financing for their productions.
Certification from the Canadian Audio-Visual Certification Office, CAVCO, is a critical trigger for the various forms of financing required to produce content in this country, including completion bond qualification, bank investment, co-production and other funding access, such as from the Canadian Television Fund and Telefilm Canada. Obviously, producers will be hard pressed to find lenders and investors who will commit funds to finance development or production in circumstances where a production may be ruled ineligible by the minister after it is produced and the monies spent.
We are hearing loud and clear from our members that the business model will collapse without the assurance of the integrity of the CAVCO tax credit certification.
The Royal Bank of Canada, one of our members, has asked us to include the following statement in our presentation to you today:
Royal Bank is the leading provider of financial services to the Canadian film industry. RBC provides, on a project-by-project basis, the interim financing of tax credits, broadcast licenses and other Government-related funding programs such as the Canadian Television Fund and Telefilm Canada. Canadian content certification is an absolute necessity for collection of the tax credits and certain payments from broadcasters, the Canadian Television Fund and Telefilm. Should the assumption of eligibility currently underlying all bank loans to this industry be compromised or diminished by Bill C-10, this will indeed limit the ability of the bank to continue funding Canadian content production.
The president of Cinefinance, a completion bond company that handles a large volume of domestic Canadian product activity, has asked that we include this statement:
We provide completion guarantees to financiers and banks, which often involve shoots in Canada. As part of our underwriting due diligence, we make certain that any condition precedent to the financing is met prior to issuing our guarantee. Any condition subsequent, such as what I understand is being discussed, would present prevent us from issuing our bond and I believe would have a serious detrimental impact on the ability of banks and other financiers to provide financing for independent films, as they all require a completion guarantee as a condition precedent to financing.
As you can see, any degree of uncertainty over the reliability of CAVCO certification will seriously deter investors and lenders from funding Canadian projects. This determent effectively would choke the industry.
It should be noted that a Canadian producer can also apply for the Canadian Film or Video Production Tax Credit in section 125.5 of the Income Tax Act, just as a non-Canadian producer can. As it stands now, on a CRTC co-venture between Canadian and U.S. co-producers, the Canadian co-producer always applies for the services credit as the production will not be eligible for the CanCon credit.
If this bill passes as is, we will face the bizarre possibility of a Canadian producer whose production is deemed ineligible for the CanCon credit, because of a ministerial determination that it is against public policy, potentially applying for the lower services credit in respect of the same production.
Introducing additional guidelines on top of the provisions of the Criminal Code will introduce unnecessary complexity and subjectivity to the tax credit certification process, and permanently cripple this multi-billion-dollar-a- year industry.
We trust that this Senate committee appreciates the importance of this issue for the film and television industry and we encourage you to amend Bill C-10 as it relates to the public policy provision of the CAVCO to limit the scope of such provision in a manner that simply seeks to ensure consistency with the relevant provisions under the Criminal Code of Canada.
The Chair: Thank you very much. It was another excellent presentation.
Honourable senators, we have heard the panel. We have 17 senators here this morning. Two of you were not present when I first introduced the committee. Let me introduce Senator Moore from Halifax, Nova Scotia; and Senator Harb, from the Ottawa region.
I understand that other committees, when they have a circumstance like this, tend to allow the senators who are permanent members of the committee to proceed first with the questioning. If there are no objections, I will do that.
The list is not long so far. I intend to proceed first with Senator Tkachuk and follow with Senator Ringuette, who has been mentioned in dispatches this morning.
Senator Tkachuk: Thank you for your interesting presentations. I also thank you for livening up Bill C-10 which, of course, has a tremendous impact on the businesses and financial affairs of Canadians. I am sure CBC Newsworld will carry that part of the hearings with the same interest they carry this portion.
This whole debate has been intriguing from certain philosophical perspectives, as well as from freedom-of-speech standpoints. Those views are also mixed up with the fact that government money is being used.
Since 2005, we have had public policy guidelines that are almost the same as in the proposed amendment. Since then, the Government of Canada has used the amendment in this bill as a regulation. It has been standing as a regulation and it has been the way the Government of Canada has administered this program since 2005.
Since 2002, when there was consultation with your industry, the Government of Canada has administered this program as if the public policy amendment was in force. Nothing has changed since 2005.
Therefore, I wonder why there is this sudden concern over a portion of the bill that has been in effect perhaps not in the same way but, in fact, the same procedure has been used since 2005. Perhaps you can tell me why there is this sudden interest.
Mr. Mayson: The public policy language goes back to 1995 in the regulations and the proposed regulations. Ultimately, it has bounced around between the regulations and then moved to the legislation, but it was never really enforced in the sense that, while it is there as draft regulation and draft legislation, it was always qualified with this guideline provision, which was always subject to consultation by the department. In effect, while that language was there, our understanding is, it has never been used effectively. Other provisions and other exclusions within the regulations have taken these things out.
In terms of the relationship of this provision with the industry, we have always expected an extensive consultation on the guidelines, which never really materialized.
The public policy language has been there, and we have supported that language from the beginning. The problem was this issue of guidelines and how it would work, and it has never been resolved.
Senator Tkachuk: I apologize because I said 2005. Really, the regulation has existed since 1995.
Mr. Mayson: That is right.
The Chair: It was not necessarily enforced, Senator Tkachuk.
Senator Tkachuk: However, I believe it has been administered, according to the Department of Finance, as if it had been enforced. That is the point I am trying to make.
The same is true since 2005 with the actual public policy amendment. That is the way they have administered the act, even though it is not the law of the land. They have used that as a vehicle to administer the tax credits.
Did you wish to add something?
Ms. Ker-Hornell: You asked about why there is the current attention. What is asked for in this bill is a blank cheque for the minister of the day to determine at any point retroactively what will be deemed acceptable or unacceptable. That is new. That has never been presented to anyone ever before. It is a frightening concept.
In fact, the whole issue of censorship becomes moot. They would be rearranging the deck chairs on the Titanic. There would be no financing model that could support that legislation, so there would be nothing to censor.
Senator Tkachuk: Was that not exactly the same amendment that was proposed in 2005?
Ms. Ker-Hornell: Yes, and it failed.
Senator Tkachuk: It has not failed. It never received —
Ms. Ker-Hornell: It was never acted on. It was rejected. The industry certainly —
Senator Tkachuk: That amendment was not acted upon as the result of an election, but it was to be in the act. You were consulted.
Ms. Ker-Hornell: I respectfully disagree.
[Translation]
Mr. Leduc: I understand the expression "public policy,'' but to be honest with you, we are not lawmakers and there is a lot we do not know about the technical side of legislation.
For example, I do not know if the French equivalent of "public policy'' has always been "ordre public.'' A number of questions have been raised in Quebec about the fact that "public policy'' was translated by "ordre public.'' However, my law degree goes back a ways.
The Chair: Do you see a big difference between the expressions "public policy'' and "ordre public''?
Ms. Doucet: If I am not mistaken, the regulations contained the expression "contre l'intérêt public,'' which was the translation of "public policy,'' whereas here we have "contre l'ordre public,'' which is how the expression "public policy'' has been rendered.
[English]
Senator Tkachuk: When the minister appeared before us, she said that a year before this particular aspect of the bill was put into effect she had offered to consult on the guidelines. She had asked for the industry's assistance in drafting the guidelines, which I thought was a reasonable request. Has anyone taken her up on that offer? Is there a problem with it?
Ms. Cunningham: I want to speak briefly to that question. In fact, the year that was mentioned was mentioned in this room I think for the first time. I had conversations with the minister, as did Mr. Mayson and other of our colleagues, and we are always open to consultation with the Department of Canadian Heritage. As a matter of fact, when this issue blew up, we were the first ones to call the deputy minister.
However, the consultation was offered only once an act is passed and that blanket guideline is accorded to the minister. Herein lies our issue, not the fact that we would want to consult with the government of the day on any issues that might involve public policy. We have always been willing to do that.
Our opinion on this matter was expressed back in 1999 when the department first started devising provisions for the act. We have always been clear about how this "contrary to public policy'' provision needs clarification and needs to be transparent, accountable and predictable. We have never varied from that position. It has never come back to us in open and clear consultation in a forum prior to being presented as an act for Royal Assent.
Senator Tkachuk: You may not have it with you, but can you provide that 1999 letter?
Ms. Cunningham: Absolutely.
Senator Tkachuk: Perhaps you can table it with the clerk so we can see what the proposed guidelines or feelings were at the time.
Ms. Cunningham: Absolutely.
Senator Tkachuk: Thank you very much.
[Translation]
Senator Ringuette: Thank you all for coming here today to contribute to our discussions on Bill C-10 and the tax credit provision.
At yesterday's meeting, I asked the witnesses if they would agree to our making a clear distinction regarding the Criminal Code in the legislation respecting the tax credit.
Some of you have said that they would like the bill to be amended. Could you elaborate further on what you would like to see in terms of an amendment to this bill?
[English]
Mr. Mayson: I think that is essentially what we proposed. We are trying to be helpful here.
The Chair: You are being helpful.
Senator Tkachuk: Yes, you are.
Mr. Mayson: This is important to us. We want to see this legislation proceed. There are many important things here for our industry. We think the simple way of proceeding is to try to clarify this public policy language by referring it to acts that are defined within the Criminal Code. It is clear, it is definable and it is understood within the entire community.
As Ms. Ker-Hornell has indicated, the lack of clarification causes great uncertainty. We think the Criminal Code provisions try to help here in terms of moving this legislation through and creating some certainty in the industry. That was the spirit and the rationale for the amendment we outlined earlier.
Senator Ringuette: I guess one of the issues is also the question of these guidelines. I want you to understand that for us as parliamentarians, when it comes to guidelines or regulations, we are powerless. Therefore, we cannot have discussions like we are having this morning. The legislation avenue is the best scenario.
I thank you for presenting the statement from the Royal Bank. From my perspective in the last decade, we have seen a lot of good Canadian artists and productions. I would hate to see all that effort go down because of a part of a guideline. I thank you for putting forth the comments from the Royal Bank.
[Translation]
Mr. Leduc: I do not know if it is appropriate to ask a question, because there are some things that I do not understand. Is it common for a bill such as this to provide for guidelines?
The Chair: This bill has not yet passed into law. We are still engaged in a parliamentary process.
[English]
Mr. Leduc: It is business as usual.
[Translation]
It is normal then for guidelines to be spelled out. I do not know if it is.
[English]
The Chair: I do not know either.
[Translation]
Senator Fox: I want to thank the witnesses for contributing some interesting ideas to the debate on this bill.
[English]
I do not care whether this legislation originated in 1995, 1996, 2003 or 2005. Our job is to look at the legislation that the government of the day has introduced and is before us. Our job is to try to create the best legislation possible. If the legislation is poor now and finds its origins in 1995 or 1996, I do not care. If it had come to this committee originally from them, we would have held the same hearings and same positions. Bad legislation is bad legislation, period. Our job is to see how we can make it better legislation. Do you agree we should move away from this notion?
[Translation]
We have heard some very interesting testimony from individuals involved in the study of civil liberties. Professor Pierre Trudel from the University of Montreal referred to Bill C-10 as an unwarranted violation of freedom of expression. Yesterday, the Canadian Civil Liberties Association echoed his sentiments. And today, producers have shared with us their views on the danger of censorship. You have conveyed to us very clearly the risks this presents for financing arrangement in the case of the film industry.
[English]
If we look at this from a public policy point of view, from an economic point of view, we all agree it is important that U.S. films continue to be made in this country. That is not your bailiwick, but from an economic point of view it is important, including training a world-class group of technicians in Canada. I have a bit of a track record and I take credit, I will say honestly, for setting up Telefilm Canada, which was important to the Canadian industry.
The fundamental flaw of logic that affects the whole bill is one that you brought up concerning U.S. productions. If you say that public funds ought not to be used for films that go against certain subjective criteria, then you must use the criteria at the same time for U.S. films, and that would also have economic consequences that are terrible to Canadian program producers, too, because they would affect the whole industry in Canada.
Is that something you would like to elaborate on?
John Weber, FilmOntario board member and President, Dufferin Gate Productions, Executive Vice President, Production for Peace Arch Entertainment: Thank you for your question. Our company, over the past 10 years, has been involved in probably 150 different productions — American productions, international co-productions and domestic productions. One thing that has always been our strength as a Canadian industry is being able to go to partners around the world and tout Canada as a place where we can deliver reliable, verifiable and bankable tax credits. It is a testament to this country and this industry that we have developed such a reliable and excellent program that is recognized around the world.
That reliability has allowed producers and money from around the world to flow into Canada, and to create jobs and infrastructure. I am speaking more specifically to Ontario and Toronto because that is where our business is located. We have built up a substantial industry with some of the best talent and crews in the world, and we are recognized for that expertise.
Any tampering with the bill that would create any uncertainty for producers would make us less attractive. There is no doubt, and I think everyone has spoken a little to it, namely, that the ultimate ability to finance productions, whether international or domestic, is based on the ability to receive tax credits and have a bank step in and lend against those tax credits. We have heard clearly from several different banks — I have spoken with them directly — and they have all said the same thing: If there is any uncertainty, they will not finance those tax credits. If we cannot deliver the tax credits as Canadian producers, we fail as Canadian producers. There is also a host of other issues including how tax credits affect our abilities to acquire Canadian broadcast licences and Telefilm and Canadian television funding.
The infrastructure is there. It just feels like we need to build on it, and I have read a lot of the scripts in the last few days. It does not feel like there is anything here substantial enough to threaten with tampering an industry that has become so substantial and successful.
Ms. Cunningham: You are absolutely right, and as producers, we find that is true. We take this responsibility seriously as custodians of public money. We are in a culture where we are dominated with foreign production, so our ability as Canadians to produce from within and to attract international investment to our projects is contingent on the incredible support that this government and Senator Fox with Telefilm Canada has created. That responsibility is huge, and we bring that to the table. The tax credit is a predictable mechanism. Films and television programs are difficult to finance. There are many hurdles. The tax credit is an incredibly effective tool, and we would like to see that it is not tampered with.
Senator Fox: It works well as long as the tests are objective and not subjective. The subjectivity part causes a real problem.
Ms. Cunningham: Again, as the custodians and as producers, we are often the direct recipients of the taxpayers' dollars, and we take that responsibility seriously. The tax credits represent a certain portion of the financing, certainly, the more objective portion.
However, to produce television we need broadcasters. With films, we have international partners, and we have distributors. All these partners work under certain criteria as well. We have ratings councils and the broadcast council, so there are many ways in which the public interest is protected in this industry. We consider that protection our responsibility.
We do not see the need, and you have seen that before you in the last week. The tax credit is working; what you have created is working. There were 12,000 productions in the last 10 years, and I believe a couple have been excluded through the regulations themselves. We would say, in the words of Senator Moore, that it is a solution in search of a problem.
[Translation]
Senator Meighen: Thank you all for coming here. I want to congratulate you on your fine presentations and for your willingness to cooperate. We truly appreciate it.
[English]
In that spirit, let me explore the solution or, at least, the partial solution that you put forward, as I understood it, which would be to bring the definition up front of what is not acceptable and to take the Criminal Code definition. That seems fine to me, except, as I understand it — it has been a long time since I practised criminal law — the only definition in the Criminal Code is one on pornography. What happens to libel, hate and all the rest of it? How do we bring those issues up front?
Ms. Cunningham: I believe hatred is referenced currently in the Criminal Code.
Senator Meighen: I do not believe that the words "gratuitous violence'' and "libel'' are in the Criminal Code in this context. Either we could spell each one out, as the Criminal Code does with respect to pornography, or we could consider giving discretion to someone, and that is the provision that you found unacceptable, I believe.
In that respect, how do you deal about the situation in the four or five provinces that have tax credits and where the general phrase, "contrary to public policy,'' is used.
[Translation]
And in Quebec, if I am not mistaken, the expression used is "contre la politique gouvernementale.''
[English]
If those words are not a red flag before a bull, I do not know what is. How do you deal with that issue and has it caused problems?
Ms. Ker-Hornell: I will speak to that on behalf of Ontario. In conversation with the chief executive officer of the Ontario Media Development Corporation, OMDC, the government agency that administers and manages the tax credits in conjunction with the provincial finance ministry, I learned that they use the Criminal Code as their benchmark.
[Translation]
Senator Meighen: If in fact it is "contre la politique gouvernementale,'' what do they do?
[English]
Ms. Ker-Hornell: It has been interpreted as solely specific to the definitions in the Criminal Code. They have never interpreted differently from a CAVCO ruling and have always interpreted specifically to the Criminal Code definitions. You are correct in saying that the language therein opens up a potential problem. However, historically there has not been one instance where they have moved outside the definition in the Criminal Code, I was empowered to tell you.
Senator Meighen: Is that not what the minister said, in a way? They said to you, trust us, we do not apply it outside the Criminal Code; and the minister said, trust me, I know what public policy is.
Ms. Ker-Hornell: There is a retroactive component to the bill.
Senator Meighen: So far, the experience has not been too bad provincially, so why would it be bad federally?
Ms. Ker-Hornell: It is the retroactive nature of how it is presented in this bill such that a decision on whether the funding will be forthcoming for certain is made after a project is completed and the money is spent. The CAVCO certification could be reversed. That possibility upsets the economic applecart of the industry.
Senator Meighen: I understand. If any committee should understand the impact of economic uncertainty, it is the Standing Senate Committee on Banking, Trade and Commerce. We know that. You made your point and I agree 100 per cent with it.
However, I will leave it at that.
[Translation]
Ms. Doucet: I would like to add something to that. You mentioned the expression "contre la politique gouvernementale.'' As I understand it, the difference is that the criteria are spelled out in the act. Therefore, Parliament has control over every stage of the process, while some judicial control is also exercised. When we talk about the Criminal Code, we have jurisprudence and the courts which establish criteria and set some parameters. However, in the case of guidelines — over which the Department of Canadian Heritage has complete authority — there is no control. The department has complete discretionary authority. With guidelines, one cannot come back before Parliament or the courts to have them assess or review a decision that may have been made. That is my understanding of this important distinction. To us, it is a matter of the minister making a decision, and of our putting our trust in him. The problem with this is that down the road, other ministers may not see things quite the same way and will have complete authority and discretion to amend these guidelines, without anyone's input.
Senator Meighen: What would you say if I were the minister and I were to tell you that these criteria will be included in the legislation, and not spelled out in the guidelines?
Ms. Doucet: That would make all the difference to me.
Senator Meighen: How is it possible to determine if a film is contrary to public policy if it cannot be screened in its entirety?
[English]
Senator Harb: You see the script.
Mr. Mayson: If I may comment, the larger issue is that in terms of certification and the relationship between the federal credit and the provincial credit, many provinces, despite their policies, generally look to the federal certification body to validate many of the certification elements. This bill creates a great deal of uncertainty at the federal level that will filter down quickly to the provincial level. We need to sort out that problem quickly. In respect of any unlawful content as defined in the Criminal Code, that broad umbrella can provide an easy way for producers and certification bodies alike to proceed as they do now, whereby the producer undertakes to ensure that the production will comply. That is how the world has functioned for the last 10 years, and we need to return there because that world has been destroyed during the last few weeks.
Senator Harb: You proposed an amendment to the existing provision and to consult with the industry and other stakeholders on the guidelines before the bill is passed, and the minister said that we should trust her and pass the bill after which they will develop the guidelines in consultation with the industry. My question to you is: What do you think of a two-pronged, parallel-track approach, whereby an amendment is proposed to reflect what you have suggested, and consultations would begin now so there is no delay in the regulations and the coming into force of the bill after it is enacted.
From the number of letters we have received, we presume that there is general consensus across the industry that stakeholders oppose this provision of the act. Is that your assessment?
Mr. Mayson: That proposal is an interesting one, senator. Obviously, this program is so important and we have such a long-standing excellent relationship with the Department of Finance and the Department of Canadian Heritage that we would be open to any discussions going forward. It is important, though, that an amendment proceed because we have such a major issue of uncertainty now. For the industry to proceed, we need a kind of touchstone to put this public policy matter in a box. We will always be open to discussions with the department, the minister and this committee going forward. That is fair to say.
It is also fair to say that there is a huge amount of concern over the current proposal, and that concern has grown tremendously over the last few weeks. At first glance, it seemed small but now it is large. We must do something about that situation quickly. There is a huge amount of concern within our industry about what those next steps will be.
Ms. Cunningham: As you have heard, certainly in the time that I have had the honour of being Chair of the CFTPA, there has never been such consensus in the industry on a single issue. You will hear from others but that is our impression and belief.
Senator Harb: It hit a raw nerve in the industry.
Ms. Cunningham: Yes.
Mr. Leduc: Specifically, in response to your question, we have no problem with the two-pronged approach.
Senator Harb: Is that the case?
Ms. Ker-Hornell: Ontario would be comfortable with a two-pronged approach on the condition that there was no retroactivity tied with a blank cheque. We can work to develop guidelines and the minister-of-the-day still has the ability to change them at any time.
Senator Ringuette: On a point of clarification, I understand the uncertainty but you must understand that Bill C-10 also contains other issues that are highly contentious and not related to your industry but to trusts. We have not settled that matter yet so I want you to understand that this bill is large.
Mr. Mayson: We totally appreciate that. I have many good friends at the Department of Finance who ask me what I am doing slowing this bill down. The issue is extremely important and this speaks to how important it is right now.
[Translation]
Senator Dawson: I want to preface my question by saying that in Quebec, we consume 80 per cent of our film and television productions. Therefore, as far as Quebec is concerned, it is doubly important to have long-term financing and a process whereby producers who are successful on the international stage are assured that the government will not come along after the fact and pull the plug on their films.
My question is for Mr. Leduc. As you know, the idea of granting tax credits was initially introduced by the Quebec government. In 1993, the Liberal government graciously made Canadian tax credits part of its election platform. This pan-Canadian success story has its roots in Quebec. Let me say again that 80 per cent of everything produced in Quebec is consumed by Quebecers.
Has Quebec ever once, in the past 15 years, reneged on a tax credit after the fact?
Mr. Leduc: To my knowledge, no. However, because tax information is, as far as I know, supposed to be confidential, my answer would have to be a qualified no.
Senator Dawson: You can understand why I am asking this question. Even though in theory the Quebec government has had this authority, it may not have exercised it in 15 years. As the saying goes, "if it is not broke, do not fix it.'' We have legislation that works well, and we have not only cultural partners, but also economic partners of the Canadian government. We have known tremendous success with this legislation since the inception of tax credits. I would like to hear from Ms. Cunningham.
[English]
If it ain't broke, why are we trying to fix it?
Ms. Cunningham: We agree with you wholeheartedly and thank goodness for the success in Quebec. Why fix it if it is not broken? We agree with that sentiment.
However, we recognize here a concern expressed by the minister that a loophole in the legislation would allow unlawful and illegal productions to access a tax credit even if they contravened the Criminal Code. Therefore, we propose this amendment as a solution to help close that loophole. As producers, it does nothing for us to have unlawful productions receiving taxpayers' money. We are in an image-making business; we care about how that business is perceived by the taxpayers.
Senator Dawson: I will be happy to see the French version of your amendments.
[Translation]
The wording is important. As you well know, Mr. Chair, as a Montrealer, that which is morally acceptable in Quebec may not always be morally acceptable in the rest of Canada. Depending on the wording of the amendment, the definition could have major repercussions for the industry. One's view of morality has nothing to do with this.
The Chair: Long live the alliance between the Scots and French Canadians.
Mr. Leduc: Yesterday, I sat in on a CRTC hearing and someone — I am not sure whether it was the chairman or someone else — used the expression "the devil is in the details.'' Unfortunately, that expression applies to many different situations.
There is indeed something important about the general notion of a tax credit. The criteria for Quebec's tax credit, the precursor to other tax credits in Canada, including the federal tax credit, are not the same. Basically, in the case of the federal tax credit, that which is not specifically prohibited is allowed. Exclusions listed include pornography, sports programming and so forth. In Quebec, in the case of television programming, production must conform to certain genres, such as magazine-type programs and so forth.
[English]
The devil is in the details. That is one of its "pitchforks,'' unfortunately.
[Translation]
Senator Biron: Thank you for joining us. Approximately how many of the films produced every year are eligible for the tax credit? What does this represent in terms of economic activity and subsidies?
Are you worried that the guidelines will result in the creation of a committee to screen the different films to determine if they in fact comply with the guidelines and to make appropriate recommendations to the minister about the granting of the tax credit? Given that it takes on average 18 months for these credits to be awarded, how much time would in fact be tacked on to this process and how would funding be affected?
[English]
Mr. Mayson: Those questions are interesting and excellent ones. We create a statistical profile of the industry every year. We can give you precise information on theatrical film.
Canadian theatrical film is usually in the range of $200 million to $300 million annually. It is complemented by theatrical films, which are non-Canadian in terms of being produced in Canada but for foreign studios. Usually that production is in the $700 million to $800 million range.
For productions claiming the production services credit, the Canadian credit would be a calculation based on the total budget of those Canadian films. Last year, it was about $221 million dollars. The year before was $311 million. We do a calculation on that and we are looking at a percentage of roughly 10 per cent to 12 per cent of the budget, if they are doing well.
We are looking at probably $20 million to $30 million dollars for theatrical films on the content side, depending on the year. They would have a smaller credit amount of a much larger budget amount for the product services credit. These are estimates. We can give you better data on those amounts.
The second question is extremely important because one of the great fears within the industry now is the creation of yet another monitoring body, monitoring content in a relatively predictable, objective transparent tax credit world. That possibility is scary to people. They are trying to be polite about it. However, a group of faceless people in a government office somewhere reviewing their film when it is already reviewed by other bodies for distribution is scary. That makes the financing side difficult.
Senator Moore: When a producer now makes an application for a film, to whom does the producer apply? Who reviews the application?
Mr. Weber: It is reviewed by CAVCO and the provincial tax credit agency if it has gone through Telefilm Canada or the Canadian Television Fund. Producers would apply to either Telefilm Canada or the Canadian Television Fund. Tax credits specifically would go through CAVCO and the provincial tax credit agency.
Senator Moore: It was reported in an article that the guidelines would give the Minister of Canadian Heritage the power to deny a tax credit to projects deemed to be offensive by a committee. You might have seen this article in The Globe and Mail a few weeks ago. According to the article, this committee "includes members of the Canadian Audio- Visual Certification Office and the Department of Justice.'' Who are those officials and what are their qualifications? Are you aware of this committee?
Ms. Cunningham: This is all speculation as far as we know because we have never seen any guidelines or proposed ones. However, over the years, there has always been talk about the "what ifs'' and "what would be a review panel.'' I think that speculation comes directly from the Department of Canadian Heritage. There has never been a serious official discussion with the industry about how this committee would be implemented, let alone what it is. Therefore, I believe that is speculation.
Senator Moore: What I say next might help remove speculation. Last fall, Robert Sousy, Director of CAVCO, said: "Ottawa wants to be more selective about the cultural products it helps to fund.''
Can you comment on that remark? How does it make you feel?
Ms. Ker-Hornell: One of our members, entertainment lawyer, David Zitzerman, attended the opportunity when Robert Soucy spoke. He was immediately posed some questions by entertainment lawyers in the room asking when there would be public or industry consultation and what it might mean because this comment was a brand new thought bubble.
The response was, do not worry, there will be public consultation eventually but nothing is scheduled at the moment. That was the end of that conversation.
Senator Moore: Does anyone else want to comment on that, please?
[Translation]
Mr. Leduc: I was not aware that Mr. Soucy, the Director of CAVCO, had made this comment. However, some caution is warranted when considering culture and the application of the tax credit. When Telefilm Canada or the Canadian Television Fund invest in a television or film production, they apply cultural criteria which are set out in the rules of these government agencies or semi-government bodies which operate at arm's length from the government.
In the case of CAVCO, and I think this was already mentioned in the CFTPA's presentation, the idea was to have objective, not subjective, rules that you could bank on. I do not know how Mr. Soucy came to this conclusion. I do not wish to argue with him. It is none of my business but quite frankly, I am somewhat taken aback by this comment.
[English]
Senator Moore: I am simply quoting him.
Mr. Mayson: I am not attributing this comment to Mr. Soucy at all.
Things have been said over the last two or three months and, in the absence of a proper consultation, they have caused the issue to blow up. Something new is afoot for the tax credit revision process and the legislative process, with which we were all fairly familiar, but no consultation has taken place.
Senator Moore: Is the Canadian Audio-Visual Certification Office, CAVCO, the entity that makes the final recommendation to the minister today?
Ms. Ker-Hornell: Yes.
Senator Moore: Does it operate at arm's length from the government?
Mr. Weber: No.
Senator Moore: It does not?
Mr. Mayson: CAVCO is an office within the Department of Canadian Heritage that makes recommendations to the minister on certifications.
Senator Moore: It is not at arm's length.
The Chair: It is part of the federal government.
Mr. Mayson: My understanding is that everyone who works there is a government employee.
The Chair: Does that answer your question, Senator Moore?
Senator Moore: Should it operate at arm's length from the government? I am concerned about the independence of the arts and the entire industry.
Some people were a bit intimidated to appear before this committee because they did not want to hurt their chances of accessing funding in the future.
Senator Tkachuk: Do you have evidence of that?
Ms. Cunningham: Does that mean we are in trouble?
Senator Moore: I am concerned that this is the office and this is the attitude, and where is it all going?
The Chair: Thank you.
Honourable senators, it is 12:06 p.m. Any further questioning of this panel will eat into the time scheduled for the next group.
A number of senators who are not on the committee have had their hands up. Of course, the sponsor of the bill, Senator Eyton, is the last member of the committee that I will recognize.
I want everyone to have an opportunity to ask their questions but I need consensus.
Senator Eyton: It is pleasant to have a little excitement and drama at the Banking Committee. This is new for this committee, given that we usually deal with fiscal matters and financial institutions.
Senator Fox mentioned that history is not important but it is, at least in this sense. History helps to turn down what I call the political emotions surrounding this issue. I have not seen any of the reticence referred to for people to appear or to make their case. If anything, there has been an exceptional demonstration. These provisions, or something like them, have been around for some years. The same or similar provisions exist in other provinces.
All of that excitement demonstrates clearly that the provisions are not part of any hidden agenda. They are not politically motivated in any way. Essentially, they are a kind of status quo and carry on an initiative that began some years ago. Senator Fox underlined the point that it did not matter what the history was, we need to create good legislation.
I have dozens of questions but I have only a minute or two. I think there is common ground that there should be standards. The question is: What are those standards? Who determines those standards? What form should the standards take?
I do not suggest I will ask questions on all those issues but I ask all of you who the appropriate bodies are to determine those standards and, perhaps, the process that might take place to establish those standards. How wide should the consultation be? Who should be involved in establishing standards, beyond the suggestion of the Criminal Code.
The Criminal Code mandates the lowest possible level of public behaviour. Staying out of jail is not necessarily the only standard. It seems there should be some standard beyond that one. The question is: Who establishes those standards and how is it done?
The Chair: Do all witnesses plan to respond to this question? If so, I ask you to keep your answers brief.
Ms. Ker-Hornell: If I may, senator, a fourth question needs to be asked: Are these guidelines, however they are determined and by whomever, to be established as a blank cheque to a minister-of-the-day or will they require a continuous dialogue on an ongoing basis with the government of this country? That consideration is important.
Senator Eyton: I raised what I thought were the three challenges: What are the standards; how are they determined; and what form will they take?
To shorten my time, I left it to: How do we determine those standards? I suggested how we determine them should be something beyond the Criminal Code.
Ms. Cunningham: Briefly, today we are referring to the Income Tax Act and a tax credit provision, a tool that was meant to encourage corporate infrastructure. It was never designed completely as a content tool. There is an uncomfortable layer in terms of an objective mechanism and then there is the matter of the guidelines. Our proposal, which we think is simple, clear and predictable, of introducing the Criminal Code into the act is meant to keep that clarity, and to use the standards by which we all live and work.
If you are talking about other forms of public policy, taxpayer investment and subsidy through the Canadian Television Fund and Telefilm Canada, guidelines are in place that outline different standards beyond the Criminal Code. Sometimes, in this kind of forum we confuse the two. Those are already decided at the government level, often in consultation with advisory councils of the industry, and we are often included as organizations.
In fact, the model already exists for these standards and consultative bodies. We are saying that in this particular act there is no need for guidelines. Should there be a need or a desire on the part of the minister to discuss issues that arise, we will be happy to talk about them, and we should be open to them.
Senator Eyton: Should others be involved in that consultation as well?
Ms. Cunningham: Sure: That should be part of the discussion.
Mr. Mayson: Adding to Ms. Cunningham's comments, with which I agree, the missing element is that we have not heard anything. The current standard using the Criminal Code has worked well over the years. We have not heard much back from the government, to be honest, as much as we love them, to say there is a problem. They are alluding in some vague way to a problem. We have not been consulted in that area in terms of them demonstrating the problem to us. We will always to be open to that discussion, obviously. We have yet to be convinced that there is a major problem, either.
Senator Eyton: There is strong evidence there is a problem.
Mr. Mayson: There is a problem now, yes.
[Translation]
Mr. Leduc: That is what I wanted to underscore, Mr. Chair. As a citizen, I hope that everyone tries to abide by the Criminal Code. I appreciate that tax information is confidential, but we do not know of any cases where this would apply. Several examples were given, such as Eastern Promises, Borderline and Tout est parfait. Earlier, reference was made to The Valour and the Horror and to other productions. In every case, the general consensus was that this did not apply.
Fortunately, I do not know of any films where this would apply. For now, films are covered by Criminal Code provisions, for example, provisions respecting hate literature. I assume that this includes hate films and pornography. I would also assume that child pornography comes under the umbrella of pornography. I have trouble understanding why this is not covered. I agree with you. Why all the fuss if everything is fine.
[English]
The Chair: Senator Eyton, how are you doing?
Senator Eyton: I am still puzzled, but I probably will stay that way.
The Chair: In the meantime, the deputy chair would like to make a point of clarification.
Senator Goldstein: I want to understand the thrust of your proposed amendment. It appears to be contradictory at first blush.
On the one hand, you say you would live with — and by extension you think Canadians should and could live with — an indication in the statute and an amendment that would provide as a criterion the non-contravention of provisions in the Criminal Code. You would leave that as the criterion that ought to be used in the future and, indeed, it is maybe used by various agencies without that statute.
On the other hand, you said you are willing to cooperate with the minister in the elaboration of guidelines. I take it that those guidelines necessarily would go beyond the provisions of the Criminal Code.
With respect, I think there is a dichotomy in that position. I want to understand what you really mean.
Mr. Mayson: I appreciate the comment. You are absolutely right.
The core of our proposal is that "contrary to public policy'' be determined by current provisions of the Criminal Code. We would delete the reference to the need for guidelines.
Deleting the reference is essential if we start talking about a two-pronged approach or something similar. It is essential for this bill to start moving again. We are not trying to turn this issue into a political football, take it back to the House of Commons and so on. We want this bill to pass, frankly.
If the minister and her officials want to have a proper discussion about there being more to it, we will be willing to talk about it. We have not had an opportunity to discuss it.
Senator Goldstein: Are you not suggesting participation in the elaboration of guidelines?
Mr. Mayson: At this point, no, absolutely not.
Senator Goldstein: You are concerned about retroactivity, and I understand that concern. My second question is, what other way is there to determine whether a production, once completed, has infringed a provision of the Criminal Code? It must come necessarily after the production is completed.
Mr. Mayson: There are two elements. If producers are in contravention of the Criminal Code, they might not be surprised if someone took them to court or something. It has not happened, to my knowledge.
There is always the coming into effect. It almost goes back to Senator Tkachuk's comments: While this language has been around and while the Department of Finance tends to see the regulations and draft as in effect, this issue has never been resolved; the guidelines, and the whole issue, have never been resolved. That, in some ways, has to come into effect at some future date if that is to come.
Ms. Ker-Hornell: Senator Fox, I believe, in the discussion with the minister a week ago Wednesday, answered this question when he said that this determination should be made by a judge in the court. It should not be made by a minister.
The Chair: Thank you. Honourable senators, we have questions from a number of senators that are not regular members of this committee: Senator Johnson, Senator Prud'homme and Senator Banks. I hope you will stay on.
Senator Banks: I am a member today.
The Chair: I was told you were not. However, if you are, there was a misunderstanding. In any event, I want you to be heard. I hope you will stay.
I welcome our second panel of witnesses this morning as we continue our study of Bill C-10 at the Standing Senate Committee on Banking, Trade and Commerce. This second panel brings before us a distinguished group of members of the film, video and arts community.
We have from the Writers Guild of Canada, Rebecca Schechter, President, and Maureen Parker, Executive Director. Thank you for coming here and for your written briefs and your input. You have helped us understand and appreciate the issues you raise.
We have from the Alliance of Canadian Cinema, Television and Radio Artists, ACTRA, Wendy Crewson and Sarah Polley, who is a well-known Canadian star. Welcome to you both. We are happy to have you here.
From the Directors Guild of Canada, we have Monique Lafontaine, General Counsel and Director of Regulatory Affairs, and Brian Anthony, National Executive Director and CEO.
Maureen Parker, Executive Director, Writers Guild of Canada: It is an honour to be here. Thank you for inviting us. Now you will hear about this bill from the artist's viewpoint, so I think you will find it interesting.
The Writers Guild of Canada, WGC, welcomes the opportunity to speak about Bill C-10. The Writers Guild of Canada is a national association representing more than 1,800 professional screenwriters working in English-language film, television, radio and digital production in Canada.
WGC members are the creators of uniquely Canadian stories such as the hit television series "Da Vinci's Inquest'' and "Slings and Arrows,'' and feature films such as the award-winning Away From Her, written by Sarah Polley. Every one of those productions depended on the Canadian Film or Video Production Tax Credit to complete its financing.
We are concerned about the wording in Bill C-10, which provides that unknown guidelines will determine whether a film or television production is "contrary to public policy.''
We want to be clear about what we object to.
We agree that the government should not fund pornography or programs that promote hate crimes or other criminal activity.
If the government wants to revoke easily a tax credit in the instance where a film or video or TV production is in breach of the Criminal Code, then that is what the amendment to the Income Tax Act should say, and to that end, we support the producers' amendment.
As non-statutory instruments, the proposed guidelines may be revised at any time without the involvement of Parliament. It is then open to special interest groups with different views to lobby for changes in the wording of those guidelines or their interpretation. That wording, in turn, will have an impact on all Canadian film and television programs funded by the tax credit. This situation is not acceptable for an objective, labour-based funding mechanism, such as the tax credit.
We find it curious that this amendment affects only the domestic tax credit and will have no application to the production service tax credit. Heritage department officials stated to this committee last week that it was inappropriate to apply the test to the production service tax credit because it is "a credit to encourage work in Canada. It is not a credit related to content.''
We were surprised to hear that, as it was always our understanding that the domestic tax credit was also intended to encourage work, but on Canadian productions in Canada, and it is also not related to content.
In structure, both tax credits are administered identically, so we see no basis for identifying one as a labour-based credit and the other as content-based.
This legislation would make it more difficult to fund indigenous productions but not American productions filmed in Canada with Canadian tax dollars. That situation simply makes no sense.
The Canadian tax credit is a labour-based credit. It is not subjective financing. To apply for the credit, a producer fills out an application form and sends it along with a bunch of documentation confirming the Canadian residency of key personnel and contracts, and a budget to confirm labour expenditures. The expenditures are reviewed and the producer receives provisional approval of the plan.
If the producer spends the budget according to the plan submitted, the producer will receive the tax credit. Producers do not send in a script. The content is not reviewed.
The proposed guidelines will change all of that process.
Film and television production is expensive. The average budget for a feature film is over $5 million, and the average budget for an episode of an one-hour drama is $1.4 million.
Producers need the tax credit to complete their financing after they have raised as much financing as they can from the marketplace, which includes government agencies, independent funds, broadcasters and distributors.
The federal tax credit, which is roughly 10 per cent of the budget, is an essential element. Producers take the certificate worth about 10 per cent to a bank. The bank generally advances 80 per cent of the value of the certificate to the producer. If there is the slightest risk that the certificate will be revoked, the banks will not consider the certificate acceptable security.
To say the producers can find private money to fund productions deemed unacceptable is tantamount to saying they will not be able to make those productions. Rarely do private investors invest in film and television production, as the current tax laws do not encourage that form of investment as they once did in the late 1980s. Introducing this level of uncertainty about funding may not be censorship in fact, but it is definitely censorship in effect.
Rebecca Schechter, President, Writers Guild of Canada: Thank you for hearing us today. As a writer for film and television for over 20 years, I want to explain to you why these proposed guidelines will make it even more difficult than it already is to create work that will succeed at resonating with Canadian audiences.
Many participants finance the development and production of film and television. Each participant reviews the content of each project at every stage. Broadcasters review the content to ensure that it does not contravene the Canadian Broadcast Standards Council's voluntary code for programming. Distributors review feature film scripts to ensure that they will be able to exhibit the film in theatres. Investors, such as Telefilm Canada or the Independent Production Fund, review the content to ensure that the project is something they want to fund and put their logo on.
It is important to bear in mind that all the parties — producers, distributors, broadcasters and Telefilm — know the business. They know how to read and assess a script. There is no need for further content review, and it would be detrimental to the creative process.
It is incredibly difficult to make a movie in Canada. It can take years from the germ of the writer's original idea for the film to the start of production. There are many creative and business reasons for this length of time and difficulty, but let me assure you, once someone has written a script and a producer wants to produce it, a director wants to direct it and actors want to act in it, it is a Sisyphean task, pushing a rock up a hill many times.
To add another layer to this difficult job by trying to guess before they even begin writing what the government of the day will consider excessive or gratuitous violence, or whether a bureaucrat who functions completely outside the creative process might deem the sexuality portrayed as educational enough to pass muster feels like the kiss of death.
What writers struggle to do is to dig deep inside themselves and come up with a human story that will connect with the audience and make them laugh or cry, or be thrilled, horrified, saddened, delighted or enraged. Adding another layer of control to the artistry required to achieve that connection makes writers want to give up entirely.
Television is developed differently from movies. Before even beginning to come up with an idea for a TV series, a smart writer will find out what kind of material the broadcasters are looking for. Do they want a cop show for a ten o'clock slot, a soap opera for an eight clock slot, comedies or dramedies? In television, writers begin by shaping their own creative urges around the needs and demands of the broadcasters. Then they shape their work around the demands of producers, directors, actors, art directors and editors, all the while trying to hold fiercely to the creative vision that inspired them to start.
Hanging another layer of guidelines on top of this process is oppressive and totally unnecessary. Broadcasters already screen out what most people consider gratuitous, excessive violence and explicit sexuality.
These proposed guidelines open the door to special interest groups who will have the power to dictate what films and television programs you and I can watch. I do not presume to tell anyone else what kind of programming should be made. Once it is made, if I do not like it, I do not watch it. I see no reason why the taste of any particular interest group should be more privileged than mine.
Art is made by creative people who have the freedom to give voice to the things they feel passionately about. Government cannot dictate what art is and is not by hiding behind phrases like "acceptable'' or "excessive.'' The history of censorship has taught us that censorship does not work. Art forces its way through oppression and, ultimately, blows it apart. Without the tax credits, projects will not be made, and the creative voice of screenwriters in this country will be silenced.
Please do not allow this silencing to happen. We ask the senators to strike out the relevant provisions from Bill C-10 that allow the government to deny tax credits to projects deemed contrary to public policy. As Ms. Parker said, we support the amendment to Bill C-10 proposed by the producers.
The Chair: Thank you, Ms. Schecter and Ms. Parker, for informative presentations.
Sarah Polley, Actor, Director and Writer, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA): I am Sarah Polley, an actor and a filmmaker. With me today is Wendy Crewson, an actor with a distinguished career both in Canada and the United States, who, like me, has made a conscious decision to live and work in Canada. We are here on behalf of ACTRA, the national union representing more than 21,000 English-language performers who work in film, television, radio, sound recordings and new media productions.
Canadian artists are outraged, shocked and frightened by this blatant attempt to censor our work. It has been decades since any issue has generated such a strong and visceral reaction from ACTRA members across the country. We are unanimous in saying the provisions of Bill C-10, which give power to the Minister of Heritage to deny tax credits retroactively to productions deemed offensive or contrary to public policy, are dangerous and unacceptable.
As you are the chamber of sober second thought, we appeal to you and all senators to strike the relevant provisions from the bill.
We are concerned about this attempt to censor for a number of reasons. First, as you have heard, it will cause a chill on production from the financing side. With this uncertainty, banks will be reluctant to provide financing to cover tax credits. Bankers will shy from any controversial or daring work if there is any risk to a key part of the overall financing structure.
I have heard it suggested many times in response to our attacks on this bill that we are free to make whatever film we want but with private money. That suggestion, unfortunately, has absolutely no basis in reality. Every Canadian television program and film that I and any of us have ever been involved in has involved some public financing. When you tell artists to use private money, essentially you are telling us to leave the country should we want to make any work that could be deemed controversial in the end.
Wendy Crewson, Actor, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA): We think that the core of this issue is freedom of expression. Article 19 of the United Nations Universal Declaration of Human Rights includes these words: "Everyone has the right to freedom . . . of expression. . . .'' This right includes the freedom to seek, receive and impart ideas through any media.
Canada's own Status of the Artist Act states that Canada's policy on the professional status of the artist is based on several rights including "the right of artists and producers to freedom of association and expression.''
I am sure this committee is familiar with the powerful words of Chief Justice Beverley McLachlin:
Among the most fundamental rights possessed by Canadians is freedom of expression. It makes possible our liberty, our creativity and our democracy. It does this by protecting not only "good'' and popular expression, but also unpopular or even offensive expression. The right to freedom of expression rests on the conviction that the best route to truth, individual flourishing and peaceful coexistence in a heterogeneous society in which people hold divergent and conflicting beliefs lies in the free flow of ideas and images. If we do not like an idea or an image, we are free to argue against it or simply turn away. But, absent some constitutionally adequate justification, we cannot forbid a person from expressing it.
Canadians are tolerant. We celebrate our differences; we do not demand conformity or uniformity. Artists firmly believe that any measure that limits our freedom of expression, as Bill C-10 does, is both undemocratic and profoundly un-Canadian.
We submit that the current laws and regulations are adequate. Projects funded through the tax credit program must conform to codes administered by the Canadian Broadcast Standards Council as well as to various sections of the Criminal Code pertaining to obscenity, child pornography and hate speech.
The heritage minister has promised to consult on the guidelines, but that is no comfort to artists. The powers will be the minister's, and no matter what she promises to do or not do, subjective powers will rest with her, with the next minister and the minister after that.
Ms. Polley: Our best known artists in Canadian film and television — David Cronenberg, Atom Egoyan, Anne Wheeler and others — are known for dark and controversial works. Canada is famous for making these kinds of films. In fact, these kinds of films have built our international reputation in cinema.
It is the job of artists to provoke and challenge. Part of the responsibility of being an artist in society is to create work that will inspire dialogue, suggest that people examine their long-held positions and, yes, occasionally offend in order to do so. I believe it is vital that some artists push the envelope, be provocative and, at times, make us feel a little uncomfortable. These moments of questioning our long held beliefs and moral codes are part of how we sort through the experience of being human. It is the fundamental job of the artist.
Throughout history, changes in societal attitudes took place because artists had the courage to challenge convention and to ask us to look at the world in a different way. We do not know how societal attitudes will change in the coming years. However, artists, with the freedom to create their work without government interference, will be in the vanguard of that change.
Ms. Crewson: Frankly, the creative community in this country is fragile. We fight to have our voices heard over the roar of American pop culture on our screens large and small, in our bookstores, on our stages and on our radios.
Yearly, our funding and protection slip away. The artists of Canada — our writers, directors, actors, dancers, musicians, painters and poets — are not the rich and famous. The artists of Canada are among the working poor. However, we know what we do is important, we do it with passion and conviction, and we are empowered by our freedom of expression. We ask you to please help us by fixing this bill.
Brian Anthony, National Executive Director and CEO, Directors Guild of Canada: I promised I would keep my remarks brief and, in light of the limited time, I will cut them in half.
The Chair: You are a great Canadian.
Mr. Anthony: My Order of Canada, is it in the mail? Thank you.
[Translation]
Mr. Chair, first let me thank you for the welcome opportunity of appearing before your committee in the course of your consideration of Bill C-10.
[English]
The Directors Guild of Canada, DGC, is a national membership-based organization representing some 3,800 key creative and logistical personnel in film, television and new media production in Canada. The role of the DGC is to protect and promote the economic and employment interests of our members. We strive to achieve that overall objective by way of a number of guild programs.
[Translation]
DGC members play a vital role in what is an important Canadian industry. In 2006-2007, film and television production was just under $5 billion and generated approximately 126,900 full time equivalent jobs. Overall, 9,090 hours of Canadian television programming were produced this year, along with 96 theatrical films.
[English]
Bill C-10 contains two provisions we welcome: the eligibility, for tax credit purposes, of certain script developing costs and the transparency that will result in the publication of details about the beneficiaries of the tax credit program.
However, it is our strongly-held view that enshrining in legislation the ability of the Minister of Canadian Heritage to deny certification for tax credit purposes of any production "contrary to public policy'' is unacceptable. Our concern is twofold: First, that ability will have a chilling effect on creative expression; and second, and possibly more important, it will create uncertainty and discourage investment in an already under-resourced sector. We have already heard comments in that regard. For these reasons, honourable senators, we recommend in the strongest terms possible that you set this provision aside.
[Translation]
I look forward to answering any questions you might have.
[English]
Senator Tkachuk: Thank you for those good presentations. However, we are talking about the Income Tax Act and the provisions therein.
On March 9, 2001, Stephen Waddell from ACTRA Performers Guild; Maureen Parker, who is here; along with Alan Goluboff from the Directors Guild of Canada received a copy of a letter from Leonard Farber and Jean-François Bernier from the Tax Legislation Division. The letter said:
As you are aware, in the February 2000 Budget, the Government announced its intention to simplify the rules in respect of the Canadian Film or Video Production Tax Credit. In this regard, attached you will find the general proposal for such amendments. Should you wish to offer your comments, we would appreciate hearing of your concerns before the end of April, 2001, to be directed to the Department of Finance at the address below. In the interim, should you have any questions, please contact Robert Soucy of the Department of Canadian Heritage or Ed Short of the Department of Canadian Finance. . . .
The same letter went to all three of your organizations. In the public policy documents on page 12, Other Technical Amendments, it said:
The existing "public policy'' and "acceptable share of revenues'' tests for the CFVPTC, which are presently found in the draft Regulations, will be incorporated into the Act. The Department of Canadian Heritage must develop guidelines as to how these tests are applied.
Those documents were sent to all your organizations. Did you reply to these letters?
Ms. Parker: As I suppose I am the only one really here, I will respond. To be totally honest with you, I have no recollection of it. I receive a great deal of correspondence, both from the government and other entities.
We have worked with the government on two aspects of the bill that my colleague Brian Anthony has referred to: the transparency of those who receive the tax credit, which is essential, and also to ensure that script development is included as part of that credit.
At no time did I have any discussion with the members of the Department of Canadian Heritage or CAVCO about guidelines overseeing the tax credit.
Senator Tkachuk: This document was important. It contained the simplification proposals for the Canadian Film or Video Production Tax Credit, Department of Finance, Department of Canadian Heritage, May 9, 2002. This document concerned your members.
Monique Lafontaine, General Counsel and Director of Regulatory Affairs, Directors Guild of Canada: To echo what Senator Fox said earlier, we are concerned on a going-forward basis about the legislation that is before us today. The issue is: What will be the effect of Bill C-10 on the industry going forward?
We have a new guard at the Directors Guild of Canada, and we are extremely concerned, as we have said today and before, about what this proposed legislation will mean. Therefore what happened in 2002, 2001, 1995, is history for us. We need to look at what we have before us today and going forward.
Senator Tkachuk: I agree with that position and I understand your concern. I do not doubt your sincerity. All of you spoke passionately about freedom of speech, censorship and the survival of the industry.
Yet, this letter along with the proposals for the basis of the bill that you see before you today were all sent to you. The documents are the basis of the amendment that you see before you today. No one replied to the letters.
Ms. Parker: We have been working with CAVCO. I want to be clear about this involvement. I have had discussions over the years with Mr. Soucy about the two amendments we have discussed as well as something called the producer control guidelines. At no point did Mr. Soucy ever engage me in a conversation about guidelines in terms of content.
You can have paper in front of you; I am telling you I have never had the conversation. I am telling you the person paid by the Department of Canadian Heritage, on the payroll of this government, never had a conversation with us about guidelines over content.
To move along, and I want to echo what my colleague Ms. Lafontaine said, it is completely irrelevant to us as to who brought this issue forward — which political party, at what time and in what forum.
I have listened to these hearings over the last two weeks, obviously as the representative of the Writers Guild of Canada but also as a taxpayer, and I find it disturbing that this issue is all about politics. What we really have before us is something that will not work and that will harm an industry that pumps a lot of jobs into our economy, and that is a cultural industry.
I think we need to step back. I do not want to be involved in the politics. I want to say that this bill will harm our industry, and we need to look at the legislation that is before you.
Mr. Anthony: Going back to Senator Tkachuk's comments, my colleague, Ms. Lafontaine, has been with the guild for two years and I have been with the guild for less than six months, so we do not have the history at our fingertips that you refer to. However, I will undertake to go back and review our files and see what the response was at the time. Nevertheless, it is the here and now that is of concern to us, not the how we got here.
Senator Tkachuk: It is of concern to me as well, but I wanted to point out and to note that something that is of such fundamental concern to you was bypassed, not dealt with, or not answered in a professional manner. I mean that in the sense that a representative of the people that you represent should have produced a formal document that would go back to the government, saying they have a concern with this particular aspect of the bill and they have a concern with that. There was silence.
Mr. Anthony: I am not sure there was silence.
Senator Tkachuk: If you have the documents, I would love to have them filed with the clerk. I am trying to obtain as much information about this issue as you are.
As I pointed out earlier, that document was big and intimidating to all of us. This whole furor was as much a surprise to me as to many other politicians in this room. I am glad you brought the issue to our attention — it has made the hearings more interesting — but the point is that it is not new. I wanted to make that point extremely clear.
Knowing what we know about the regulation being in effect since 1995 —
Mr. Anthony: It has not been in effect.
Senator Tkachuk: According to the Department of Finance, the credits have been administered according to those guidelines since 1995, and since 2005 as if the amendment had actually been in place. How is this bill different administratively from what has taken place administratively until now? That information will help us greatly.
Ms. Schechter: The evaluations that CAVCO have made all this time about tax credits have been on the basis of labour, employment and budget. No one in CAVCO, in the audiovisual certification department, has ever, to my knowledge, looked at a script I have written or a finished film in order to decide whether to give the tax credits. They do it on the basis of figures and objective measures.
We are saying we do not want that to change — and that is what will happen. The proposed legislation, therefore, has not been in effect.
Mr. Anthony: I will speak briefly to that point, and then I will ask my colleague, Ms. Lafontaine, our general counsel, to speak to the coming into effect of this particular clause.
Senator Tkachuk says that it has been administered as if it were in force. However, in fact — and I think Senator Moore drew this out of departmental officials the other day when he tried to determine the size of the problem — they admitted that only two productions in anyone's memory were problematic; one in 2002 and one in 2007.
My understanding is that — and you should grill the minister and her officials on this subject when they come back — these productions were set aside because of the pornographic content of the regulation and not because of this vague public policy provision that no one seems to know what to do with.
It really has not been used; it has been sitting there. What is new in all this is we were promised, as Senator Moore referenced early, at an event that my colleague attended last year that there would be prior consultation, in October I believe, before the coming into effect of this provision, before it was enshrined in legislation; so that is new.
What is also new is that the Minister of Canadian Heritage indicated to us originally that this legislation was simply a housekeeping matter to bring the Income Tax Act, as it relates to film and television production, into accord with the Criminal Code. However, in her own testimony, she said that, as well, it was for other types of content for which public support is clearly unacceptable. Under questioning, as I understood her to say, she said it is for other types of content that are not just illegal, but illicit and immoral. That is when alarm bells started going off.
Ms. Lafontaine: I do not have much to add to those comments because I think they encapsulate the situation. However, the regulations were never in place; they were draft regulations. There was never any statutory provision adopted that said the minister had carte blanche to say this film or television show will be financed by CAVCO and this one will not.
That point is also important for this committee to keep in mind; that there was never any statutory provision that allowed that. That is what has us immensely concerned; this will give such tremendous power to the minister that with the flick of a pen, a production can lose the ability to be financed through the CAVCO regime.
To echo what my colleague Mr. Anthony said, we are puzzled about this whole process and why it is so urgent that this amendment be made, when there has not really been an issue in terms of the types of productions that have been financed since the creation of the CAVCO production system. The two productions that were at issue fell within the exception, so we do not see that such a huge authority being granted to the minister for a problem that does not really exist is necessary or should be adopted.
Senator Johnson: It is great to see you all here today and to have this kind of discussion about the cultural life of Canada.
I do not think we are here to argue about the past or the future; I think we should deal with what we have here now, and that is to solve a problem. This problem has touched a deep nerve in this country — not only with arts people, but with everyone who supports the arts or runs festivals, like I do in rural Manitoba, to allow people to enjoy the arts and film of this country.
This legislation may be an Income Tax Act, members of the Banking Committee, but it is also our job as senators, and our role as senators and the second chamber of this country, to deal with matters like this one that are perceived by a majority of the people involved as flawed legislation. Whether it is or not, and whether the history is or is not, is irrelevant.
I am excited that this issue has come to the table and that we can discuss openly what perhaps will extend into much greater discussions about the whole situation regarding the arts in Canada. I have been trying to have this discussion in the Senate for a number of years, and I think this issue may promote it and help it a great deal. I am grateful you came, and my colleagues all know where I stand on these issues. The arts rule — future populations will not dig up computers. They will dig up paintings, writing and everything else done by the artists of our time.
Having said that, I and many senators here support the arts, and I know the minister is working hard to bring this issue to a resolution.
Briefly, what do you want this committee to do?
Ms. Parker: The Writers Guild of Canada supports the amendment brought forward by the producers association today. It is a quick, clean solution and we support it. It is the removal of guidelines and any inference to guidelines. It simply qualifies that public policy be brought into line with the Criminal Code.
We would support it entirely.
Ms. Polley: To be specific, this committee can recommend amending Part 2 of the bill, clause 120: delete paragraph 120(3)(b), subclause 120(12) and subparagraph 120(16)(a)(ii).
Senator Johnson: Great. That is what I need to hear.
Mr. Anthony: We want to take the CFTPA proposal under advisement, senator, so that my legal colleague and I can look at it. We are here to establish a point of principle: that the minister should not enjoy unfettered discretionary subjective powers after the fact to make determinations.
The eligibility criteria must be front-end loaded. If it eans introducing clarity into the regulatory framework that surrounds the use of the Income Tax Act for film and television production purposes, then we would be happy to engage in those discussions.
The Chair: Mr. Anthony, you have made that point. After you and your legal colleague have taken it under advisement, will you let the committee know whether you can support those amendments? They are fairly clear, precise and useful to the committee.
Mr. Anthony: We will undertake to do that, sir.
Ms. Schechter: I agree with Ms. Parker.
Senator Johnson: Ms. Polley, can you tell the committee why there is a problem with raising money for Canadian films.
Ms. Polley: Specifically, I was talking about raising private money for Canadian films.
Senator Johnson: I know. Why does this problem continue? You are doing so well.
Ms. Polley: To be honest, I do not think the main concern of all of us here today is that there is not more private money for film, although it would be nice. Rather, we all feel very, very lucky and happy to work in a system that is primarily dependent on public money. A kind of creative freedom and agency is afforded by public money that is not possible in a private system. It is the reason that most of us choose to work in Canada instead of in the United States.
That is why these provisions are so threatening to us. They fly right in the face of the reason that we hold public money so dear. Public money allows us to make works that are controversial and that can be provocative, which is not possible with private money.
It would be great to have another source of funding for films — that would be fantastic — but, ultimately, I would always choose to use public money as opposed to private money, and that is why most of us stay in Canada to continue our work.
Senator Johnson: Thank you.
The Chair: Ms. Crewson and Ms. Polley, I do not know if you are aware that we have our own star here in the Senate who is sensitive to all these issues and who is creative.
Senator Banks, this is your opportunity to show us your stuff.
Senator Banks: Thank you, Chair. It was a long time ago.
The Chair: No, sir, I have seen you in action recently.
Senator Banks: By way of disclosure, I should say that I am a member of ACTRA.
The Chair: I can assume you are a proud member. Are your dues paid up?
Senator Banks: They are paid up. I am not emeritus. I am also a member of the Academy of Canadian Cinema and Television. I confess that I am on the side of the arts being in the business of offending, as was said earlier, because if it cannot do that because it does not have the right, then we should all go away.
If there is a 900-pound gorilla in the room, it is the view of a significant number of Canadians that there ought to be some place in-between carte blanche on the one hand and offence against the Criminal Code on the other hand. A large number of Canadians, and we heard from some of them yesterday, say that the Criminal Code, per se, should not be the only measure of whether a production receives public support, funding, grants, tax credits or whatever.
As well, from time to time they see or read about productions that have received the tax credit that are offensive to their taste. We all know the impossibility of legislating taste. Is there any place between staying out of jail as the mark of good taste and receiving public funding in any form as the mark of good taste? Is there such a place?
Your comments thus far would indicate there is not such a place because you suggest that the criteria should be those items that are contained in the Criminal Code, an offence against which would preclude any of the above. Is there any other measure?
Ms. Schechter: If I may begin, we are not saying that public support should go to just anything. The fact is that public support comes to our industry in many forms, and most of those forms have content screening mechanisms built into them. However, the tax credit is the one form that does not have such a mechanism.
Senator Banks: It is the form of funding that arrives at the end of production.
Ms. Schechter: Yes, but it is also key at the beginning because the promise of it allows producers to obtain their final 10 per cent of funding.
They will not arrive at that final 10-per-cent stage without going through a great deal of screening and taste evaluation by the people who are the gatekeepers to the system and to the public monies that arrive via other routes such as the Canadian Television Fund, the CBC, the broadcasters, Telefilm and the Independent Production Fund.
It is not necessary, it is obstructive, and it will destabilize the industry in the tax credit form. We are not saying carte blanche because that does not exist.
Mr. Anthony: Senator Tkachuk had to leave, but he did make an important point before so doing. He reminded us that we are dealing with the Income Tax Act. We need to make a distinction between the two forms of funding available from the federal government: direct funding, and programs of grants and contributions, which are highly subjective in the decision-making process. As well, there is indirect support by way of the use of a tax regime, in this case the Income Tax Act, which must have the highest degree of objectivity and predictability attached to it.
It is tax time now. We are all submitting our tax claims and, as you know, if taxpayers have charitable tax claims issued by registered charitable organizations, then they are able to calculate automatically to include those items on their income tax return. They do this and they receive that. The same thing happens with the tax credit program for film and television production.
If you introduce an after-the-fact degree of subjectivity and uncertainty, the whole system falls apart. It is also worth remembering that this credit is a labour rebate for wages and salaries. It is not content driven. Other screens are in place to deal with some of the content issues that Senator Banks has raised. I hope, Senator Banks, that this answer goes some way to speaking to your question.
Ms. Parker: May I add one last piece? It is important to finish by saying that in Canada we need a variety of tools. We need direct investment and we need indirect investment. You might wonder why there is such a huge squawk about a tool that gives only 10 per cent of the production budget. In this country, we need that tool to make expensive film and TV productions. By the way, our budgets amount to a fraction of those of the U.S.
You might wonder why we have far less action on our screens. It is because it costs money, and we do not have it.
It costs $1.4 million to do an hour of television. That is the average; one episode is $1.4 million. Therefore, you can see that 10 per cent is significant. There is no other mechanism in our industry to raise that essential component. That is why this 10 per cent, both the direct and the indirect financing, are so essential to us.
Changes to this financing really would knock us off our feet.
Senator Banks: I will ask Ms. Polley a question. We have on record testimony yesterday from people who said it is wrong that an industry should rely and exist primarily because of public funding.
You have said today that this industry exists primarily because of public funding. I wanted to give you an opportunity to argue, for the record, why that should be so. Why should we have something that exists only because of public funding and that would not otherwise exist?
Ms. Polley: We live next door to a superpower and we are dominated continually by images from another country. We need to do everything we can to invest in our own culture so we have access to our own voices and stories, and we are able to engage in a dialogue with each other. That situation will not be possible if we do not have public financing. I think public financing is part of what makes up the fabric of being Canadian. It is essential to our identity, and I think as soon as we begin to lose a sense of our cultural identity, we lose a sense of who we are.
Ms. Lafontaine: I want to add something to that about the funding, in general, for Canadian productions in Canada. We need public funding because of the size of our market. The Canadian market is far too small to be able to fund productions from the private sector. In the United States, a television show can have an audience of 20 million viewers. In Canada, we are lucky if we have one million.
It comes back to the question by Senator Johnson. We do not receive private sector funding for this industry because it is not profitable. It is not a money-making machine. This industry is about creating Canadian art and having Canadian cultural expression on our airwaves and in our movie theatres. The only way to have it is through public funding. We need to decide whether we want a Canadian film and television production sector.
Senator Baker: First, I thank the witnesses for their excellent presentations this morning. Second, if we amend this bill, it goes back to the House of Commons where it was adopted, in its present form, unanimously, with each political party in agreement.
We are to provide the sober second thought. However, now the MPs say they did not know what was in the bill. You have heard the political parties say they did not know what they were passing. I do not know how we can give sober second thought if there is no first thought given to the bill.
The Chair: This is the making of a good film here.
Senator Baker: My first question relates to the evidence here this morning that the tax credit is not given to pornography. The production of pornography is excluded from the tax credit. Therefore, given that this provision will now be directed at other productions, do not you agree this is an attack on the "Trailer Park Boys'' — an attack on Bubbles and Ricky, and that they really want Mr. Lahey to drink tea and his side kick to put on a shirt?
My second question is this. The House of Commons did not know what was in the bill, and two political parties stated they would not have voted the way they did. None of the words "film,'' "writing'' or "artistic community'' were mentioned in the three readings in the House of Commons or in the committee. You were not called as witnesses as is normally the case when a bill affects someone directly. Not even the minister stood up in the House and said what was in the bill.
Do you agree, then, that we have a duty to amend the impugned sections relating to censorship in this bill and send it back to the House of Commons for reconsideration on the basis that they did not do their job in the first place?
Some Hon. Senators: Hear hear!
The Chair: I rule the question to be totally in order and I would like a brief response.
Mr. Anthony: I think most of us feel that if it went back to the House it might receive the level of debate and attention paid to it that it should have had in the first place.
Ms. Schechter: I agree with you that it is a direct attack on "Trailer Park Boys.'' However, I also want to comment that a couple of months ago the Canadian Television Fund held an event where all the "boys'' were there, and representatives of every party wanted to have their picture taken with them.
Senator Spivak: I do not have any questions, but I do have a couple of statements.
The Chair: Questions only.
Senator Johnson: You have to ask a question.
Senator Spivak: First of all, I want you to know that no bill can become law unless the Senate passes it. It does not matter if the House of Commons does not agree with us. It comes back here, and we hopefully will never agree.
I have two things to say. First, in the world in which we live where we can see increasing attempts to silence opposition, thank God for Canada. We should never disturb the fragility that exists in this wonderful country for freedom of expression.
The second thing is, as a taxpayer, there is all this business about how taxpayers should not give money to something that, God forbid, offends them. What about the oil sands? What about tobacco producers? I do not agree with them, but we live in this country and we support them.
Scratch the taxpayers' argument and thank you for coming.
Senator Corbin: I am taking notes for a future speech.
Senator Moore: Ms. Polley, yesterday I quoted you as reported in The Globe and Mail recently. I want to do it again and I want to have your comment.
You were quoted as saying:
This legislation threatens freedom of expression as well as the very financial foundation upon which this industry was built. Take that away, and many of us would be hard pressed to understand the motivation to stay here.
You went on to say with regard to the legislation:
The whole thing is sloppy. Of course we shouldn't invest in movies filled with excessive pornography or hate. That makes sense, and there are rules . . . to prevent that. But there are a lot of things that have not been rigorously thought through.
Do you want to add to that comment?
The Chair: First of all, you want to know if The Globe and Mail actually quoted her accurately.
Ms. Polley: In response to the question of whether there should be some ground above where you would go to jail for something, the answer to that, I think, unfortunately and simply, is no. That is what freedom of expression is about. If it is not against the law, you get to say it. That is what it means to live in a free society and to be able to express one's self as an artist.
If anyone has been through the process of trying to find fnancing for a film in this country, it is not easy. We are taken to task and raked over the coals artistically, morally and creatively. Therefore, the things that we fear seeing, generally, will not be made. I do not think there is an example of something that has been made that offends us on that level. We have been told of two productions. However, we have not been given the names of the films so we can debate those productions and their artistic merit.
Ultimately, that is the cost of freedom of expression. We will all see movies that we do not like; I see movies I do not like. I see things that offend me politically. I see things that offend me morally. However, I choose to debate them and to have a dialogue about them, or to turn away from them. I do not say they should not be allowed to exist and certainly, would not choose to give that power to the minister to make that decision.
Some Hon. Senators: Hear, hear!
Senator Moore: I mentioned before the last panel and I want to put this question to you all. With regard to the statement last fall made by Robert Soucy, Director of the CAVCO, he is quoted as saying: "Ottawa wants to be more selective about the cultural products it hopes to fund.''
How does that make you feel?
Mr. Anthony: My colleague was at that event and perhaps she could best respond.
Ms. Lafontaine: Yes, I was in attendance at that presentation. I think all the actions that the Directors Guild of Canada has taken with respect to this proposed legislation are indicative of how we feel about it.
We are concerned about the broad powers going to the minister. We are concerned there are certain films that are not illegal that they do not want to see funded. That is precisely Ms. Polley's point a moment ago. The notion that the minister would have the authority to select a Canadian production some day because it might offend someone's taste is chilling for us.
Senator Moore: I think of that quote, and the proposal that there would be a committee, and that office would be part of the committee. When we connect the dots, it looks to me like the freedom of expression that we so cherish is being inhibited.
I am concerned about that.
Ms. Parker: It is an unfortunate remark. I am sure it is something that we will work hard to ensure does not happen.
I agree completely with what Ms. Polley said. The middle ground between what is criminal and what is simply offensive is not up to us to decide. That is why we are able to turn the channel or go to see a film that we may or may not want to see.
Senator Moore: Exactly: We had a discussion yesterday and I talked about input to guidelines. It was said that too much input from yourselves could be dangerous. You are characterized as being extremists in your outlook. I do not know how anybody could say that with an open mind.
The arts are what separate us from the apes. Do you want to comment about the "danger'' of your input? You probably looked at the testimony of yesterday. Therefore I want to give you a chance to comment on that.
Mr. Anthony: I was going to say through you, Mr. Chair and senator, that we are a dangerous group of people. Creative ideas are considered to be dangerous to some people.
What is really dangerous here — and I do not think the full enormity of this position has really begun to be appreciated — is that there has been talk about guidelines here to be established by the minister, with or without the participation of the film and television community.
It is my understanding from the departmental officials that, regardless of what guidelines eventuate, whether or not this bill is passed, there will be guidelines of some sort which will govern all grants and contributions of the Department of Canadian Heritage. That situation will have a huge impact. Senator Fox will recall from his tour of duty as the Minister of what is now the Department of Canadian Heritage when I was a young pup working for him, it is a huge program. If a public policy optic is applied to all grants and contributions programs in the department — and there are many, it cuts across not only the broad cultural community, but across all the official languages minority groups funding that the department creates as well as other minority programs. If they start to apply a public policy optic to all of that, a sieve, if you will, they could run into some serious problems.
The Chair: The Senate will sit in three minutes. Senator Biron has asked to speak. I would like him to have his question. We have three minutes left for the question and answer.
[Translation]
Senator Biron: In terms of economic activity, the film industry generates several billion dollars annually and is an important component of our gross national product. Setting up a committee or organization that would be responsible for verifying that films were produced in accordance with the public policy guidelines would delay the process of granting tax credits and would lead to unacceptable economic uncertainty.
Would the amendment proposed by the Canadian Film and Television Production Association, or CFTPA, allow organizations such as REAL Women of Canada, Canadians who are concerned about entertainment of a violent nature and all other organizations to file a complaint if they feel films are contrary to public policy or contrary to their moral values?
Ms. Lafontaine: I am not certain that I understood your question. Are you asking if the CRTC's proposed amendment would allow organizations —
Senator Biron: — organizations that consider these films to be contrary to public policy would be able to file a complaint and request that the matter go before the courts.
Ms. Lafontaine: To answer your question, as my colleague stated earlier, we want to examine this proposal to determine what impact it would have on production. We would need to examine it in light of your question. If the law states that a production which violates the Criminal Code should not be financed, then we would need to look at whether the production as such violates the Criminal Code. I think this issue would be of greater concern to producers. However, we would need to examine this further in order to answer your question more succinctly.
[English]
The Chair: Thank you, honourable senators and witnesses of both panels. I think we have had another enlightening debate and discussion. I hope you agree that the Senate is giving a good hearing to an important question. Thank you all for coming.
The committee adjourned.