Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 22 - Evidence - Meeting of June 11, 2008
OTTAWA, Wednesday, June 11, 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 4:10 p.m. to give consideration to the bill.
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Good afternoon and welcome, ladies and gentlemen. I welcome also our viewers on CPAC and on the webcast.
I call to order this meeting of the Standing Senate Committee on Banking, Trade and Commerce.
[Translation]
Welcome to this meeting of the Senate Standing Committee on Banking, Trade and Commerce. Today, we continue our study of 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.
[English]
That is the official title of Bill C-10, with which we have been wrestling since mid-November.
My name is Senator David Angus, from Quebec, and I am the Chair of the Committee. Senator Yoine Goldstein, from Montreal, is the Deputy Chair of the Committee. Also present today are Senator Francis Fox, from Montreal; Senator David Tkachuk, from Saskatchewan; and Senator Wilfred Moore, from Halifax.
Our witnesses today will speak to issues arising from clause 120 of Bill C-10 which would amend the section of the Income Tax Act that sets out the rules applied for purposes of computing the Canadian Film or Video Production Tax Credit.
[Translation]
You no doubt have been following our deliberations to date. We have heard from more than 64 witnesses on the topics covered in this bill. We are very happy to have you with us this afternoon. Today, we welcome Mr. Carl Laudan, Producer and Director with Cinéman Films Inc. and Sheltered Life Productions Inc., and Ms. Brunhilde Pradier, President of the Alliance québécoise des techniciens de l'image et du son. You have the floor.
Brunhilde Pradier, President, Alliance québécoise des techniciens de l'image et du son: Thank you, Mr. Chair and senators, for allowing us to speak on Bill C-10. My name is Brunhilde Pradier, I am the President of the Alliance québécoise des techniciens de l'image et du son. I have served as President of AQTIS for the last two years, and it is in my capacity as a representative of the association of creative artists and technicians that I am expressing the opinion of members of our alliance on a highly controversial provision contained in Bill C-10.
Before addressing the issue, allow me to begin by introducing you to the Alliance québécoise des techniciens de l'image et du son (AQTIS).
Our founding union, the SNC, the National Film Union, was first created in 1969 by Quebec film professionals seeking to build an association that would bring together creative artists and technicians who are passionate about their art and work to carry out film projects in the very specific cultural context of North America.
Today, AQTIS represents more than 2,800 artists and technicians, in addition to 1,200 technicians on leave who will soon become members, all working in more than 100 various trades such as camera work, sound, sets, production, costume design, hair and makeup, special effects, production assistance, technical assistance, lighting, television production, and film production. Members of our alliance are freelancers and work for independent Quebec and foreign producers.
Members of our association work in close collaboration with independent producers, members of the APFTQ, script writers, members of SARTEC, producers, members of the ARRQ, and the CQGCR, the actors guild, members of the UDA and ACTRA, and creative artists and technicians.
The fundamental mission of our organization is to defend the interests of its members. That is why AQTIS has always been actively involved in public debates concerning policies that apply to our industry which, I may remind you, is an industry unlike other industries because it falls within the realm of culture.
[English]
Senator Moore: Ms. Pradier, you mentioned some organizations by initials. Can you, for the record, give us the full names of those organizations, please?
[Translation]
Ms. Pradier: The APFTQ stands for the Association of Film and Television Producers of Quebec, the SARTEC stands for the Alliance of Canadian Cinema, Television and Radio Artists, l'ARRQ which is the Association des réalisateurs et réalisatrices du Québec, the CQGCR which is the Conseil du Québec de la Guilde canadienne des réalisateurs, l'UDA which is l'Union des aristes and l'ACTRA which is the Alliance of Canadian Cinema, Television and Radio Artists which is the association representing English-language actors in Quebec and elsewhere in Canada.
I was just telling you that our industry belongs to the realm of culture, is meaningful and as such participates in the advancement of society.
As cultural experts, our members are aware of their place in the development of our film and television culture. They are concerned — and monitoring them — about political changes that will have an impact on the vitality of our culture and our ability to foster a perspective and vision that is both original and Canadian.
On May 29, Mr. Roger Frappier appeared before this committee and said, and I quote:
. . . even technicians have approached me telling me that this makes no sense.
So here I am, speaking loud and clear on behalf of the creative artists and technicians members of the AQTIS who are very concerned over the meaning of this new measure.
Why is AQTIS getting involved? As a union, our mandate is to negotiate our members' working conditions; but we are also concerned over changes that will have an inevitable impact on our ability to finance productions. These changes could have serious repercussions on the funding structure making projects currently under way impossible to complete except for the certain demise of jobs connected to them.
I do not wish to add to any of the arguments against Bill C-10, in particular section 120, which have already been made by producers. Despite what can sometimes divide us, I can assure you that the AQTIS and its members stand in full solidarity with producers. This provision in Bill C-10 would be harmful to the film industry and alongside all film industry stakeholders, we stand in opposition to it .With all due respect to the Minister of Heritage, we do not agree with the position she defended here. We feel that Bill C-10 includes its share of perverted effects — no play on words intended — and that the consequences on our industry will be far greater than the scale of the minor problem the minister wishes to resolve.
We are told that since the tax credits came into effect, a couple of film projects would have been barred from financing. Can we really therefore call it a problem? As the saying goes, ``If it ain't broken, don't fix it.''
By introducing the risk of not granting tax credits, this measure jeopardizes the necessary funding for start-up projects, and their production. Many producers and a few bank representatives appeared before this committee to explain how production financing works. You were showed how banks are averse to taking risks and that certain productions may be refused start-up financing because of the uncertainty associated with the granting of tax credits a posteriori. You also showed you that approval process for projects run the risk of becoming more complicated, not to say ludicrous, because banks would become more concerned over film content, rather than refer to the decisions of state funding organizations, as they have been doing to date.
The rationale behind this new measure on tax credits introduced in bill C-10 is flawed from the very start.
Earlier, I talked about our significant concerns over this new measure and its meaning since it deals with morality. Many stakeholders have pointed out that currently, the Criminal Code contains all the necessary provisions to take action against filmmakers, as is the case with corporations or individuals who are all subject to the Criminal Code.
What concerns us is that much greater importance is given to existing provisions. We find this extremely alarming.
It is all the more alarming, because the minister said before this committee, and I quote:
. . . that pornography is not a strong enough benchmark, that the Criminal Code is not a strong enough benchmark.
But what benchmark do we want to impose? That is the question. The minister herself seems to say that our courts and legislation are not enough, so instead she proposes to give an administrative body the responsibility of deciding whether a completed film, which would have had to go through several funding stages, is contrary to the public policy.
The minister emphasizes this by claiming, and I quote:
Forth, it reasserts the principle that there is audio-visual material which may not be illegal but which taxpayers should simply not be expected to pay for.
To create a decision-making authority outside of the court system, which is based on subjectivity and on the discretion of a committee of administrators, no matter how enlightened they may be, appears to us as an unhealthy way of proceeding in a democratic society.
The Criminal Code and the courts of this country are the guarantors of public policy and we believe this is a choice our society has made, one which we can be proud of and grateful for. We do not want to have another system. We feel it is dangerous to proceed in the manner proposed under Bill C-10.
I would like to tell you about the characteristics of drama productions to help you understand the context of the situation. Indeed, the new provision of Bill C-10 goes completely against the fundamental characteristics of drama productions, which are thought provoking and which force us to question certain things. These productions highlight actions, situations and emotions which, when they deeply affect us, tell us something about ourselves. Works of drama present ideas in a whole new way. Just as shadow and light are the tools used by a lighting technician, a director of photography will tell you that by creating shadows he reveals things in a new light, the one helping to reveal the other.
What is referred to as contents in the bill are in fact the tools used by creators who create entire universes. They are the master artisans of the way we perceive the society we live in. They can look at 1,000 situations, attitudes, dogmas, acts and thoughts, and see something which is revealing about our society. Creators are often trailblazers. They dare to create works which reflect the way we are. Sometimes they shock us, they make us question what we believe in, and they force us to see things in a new way. Yes, these creators are in our face, but we need them to provoke discussion, and this discussion is healthy in our society, because they allow us to put things in their proper context, to evolve and ultimately we are better off for being provoked into a new way of thinking, rather than sleeping-walking through life.
We certainly doubt that the people who manage the tax credit program know much about the language of cinema and can appreciate what an artistic creation is all about, or whether they can even appreciate just a part of it, which would be even worse. We doubt that even with guidelines, these people would not appreciate an artistic creation in its entirety, in fact, we think these guidelines would make appreciating it even more difficult. But we really do not expect them to get it.
In our opinion, Bill C-10 violates freedom of expression. It imposes rules governing tax credit eligibility, and these rules will probably cause some creators to censor themselves, and therefore they will not deal with certain subjects, or approach a subject in a manner which will be more acceptable to producers and government officials. If we are told that there will be no censorship, we will nevertheless probably be affected by an insidious form of censorship, because producers will choose their subjects carefully, they will deal with issues differently and therefore the artistic quality of the productions will be affected, either because the artists chose to create them differently, or because the producers chose to take a different angle. If that happens, we will all be losers.
It is also an unconscionable rule. The new provision in Bill C-10 is unfair because it only applies to domestic productions and does not apply to standard productions that are ``turn-key'' productions, which are produced for a foreign producer rather than a domestic one. This is, at the very least ironic and that too does not make sense.
This policy goes completely against the non-interventionist stance Canadian governments have normally taken with regard to audio-visual productions. As far as regulating the broadcasting of violent television shows was concerned, the government chose to allow the broadcasters to warn the viewing audience rather than legislating restrictions.
However, some Canadian television stations only show this type of production to Canadian viewers. The vast majority of these productions are American, and some of them are often standard productions.
Canada is the only country in the world which shares a border with the largest producer of television shows in the world, and Canada produces programs in the same language as do the Americans. Because of the difference in size of the American and Canadian markets, Canada is flooded with American audio-visual productions and culture, and therefore our domestic industry cannot survive or thrive without government support.
Because of the unfairness of the tax credit policy in this sector, any potential positive impact, if public policy was really at stake, would in effect be irrelevant.
Canada and Quebec have created a dynamic film industry which produces programs for our citizens which reflect our national cultures. The industry employs many Canadians with a range of talents, and most of them work on independent productions, which partly depend on tax credits. Thanks to support from the government, we can add our voices to the wealth of cultural diversity. We have concluded that this controversial provision of the bill will only make our industry more vulnerable to massive competition from the Americans.
The economic situation of our members is closely related to the vitality of Quebec's film industry. In the current global context, which is dominated by American movies, our own film industry will not be able to survive and prosper unless the things which have made it successful until now can be improved, so that our film industry can grow and thrive. At stake is the creativity of our directors, the skills of our technical teams, the know-how of our producers, and certainly all the funding mechanisms which support these productions. Among these, tax credits play a vital role.
In conclusion, I know that from the beginning of your deliberations you have heard from many witnesses who have told you about the extent of the fall-out of the provisions of Bill C-10. Let's not forget that the artistic sector has spoken with one voice.
I would like to end by conveying to you the most important message on behalf of the 2,800 craftsmen and technicians I represent. Bill C-10 contains provisions which will harm the film industry. It contains provisions which stand in the way of a thriving cultural industry. From a public policy point of view, these provisions are completely unacceptable, on top of being useless and inappropriate. On behalf of the members of AQTIS, I would ask that you, members of the Senate, do everything in your power to ensure that this provision is eliminated. Thank you for listening to me. I would be pleased to answer any questions you may have.
The Chair: Thank you for your very interesting presentation. We will continue with the second witness.
[English]
The Chair: Mr. Laudan, please proceed.
Carl Laudan, Producer and Director, Cinéman Films Inc. and Sheltered Life Productions Inc.: Thank you for having me here today. I am not as famous or renowned as many of the recent witnesses from the film and television industries. Because I am a new filmmaker in this country, I can speak to some things that have not been covered yet regarding Bill C-10's proposed provisions for film and video tax credits. I hope my testimony will help. I will be brief. I note that I am appearing before this committee in my personal capacity and that my remarks today are my personal views.
Film and television production in Canada directly employs accountants, lawyers, technicians, actors, IT, insurance companies and their employees, banks and their workers, government departments at all levels and many other related service companies and individuals.
Taking away our tax credits takes away employment from all these different elements of our society and these hard- working individuals and their families. If provisions in Bill C-10 for the film and television industry's tax credits become law without being amended as the Canadian Film and Television Production Association suggests, then I will likely be forced to leave Canada because there will be no way to make films in this country as a resident Canadian. Only Americans and other foreigners will be able to make films here. All the Canadian film makers I know feel the same way.
I am a westerner, born and raised in Vancouver, and I presently live in Montreal with my co-vivant. She writes; I direct, produce and edit our films. I am one of the feature film makers of this country and, being in the final stages of finishing my first feature film, one of the newest. Unlike David Cronenberg or Atom Egoyan, I and the vast majority of feature film directors in this country are members of the working poor. It must come as some surprise that we are not, in fact, rich. You would think that, with show business, comes fabulous, spontaneous wealth. Not so.
Let me take my first feature film Sheltered Life as an example of why poverty in the Canadian film industry is so normal. I shot Sheltered Life in Vancouver last summer. It played in the south of France last month with Perspective Canada Cannes, one of only four English language Canadian feature films invited by Telefilm for that honour and that special promotion. We made our film for a very low budget; we were the lowest budget production showcased there.
My producer and I spent six months full-time putting the application together to ask Telefilm for production investment — unpaid work with no guarantee that we would get the equity loan. Between 3 and 5 per cent of applications are successful. In that application, Telefilm demands that a full and complete budget, financing statement and cash flow be submitted, among many other things. If any of these documents do not pass Telefilm's rigorous business practice checks, everything stops. If Telefilm does not like the film on a creative level or for any reason, really, everything stops. Access to Telefilm's financing only comes from a completely financed film and the proof of that on paper. If just one part of the financial picture drops out, everything drops out. Whenever a feature film gets made in Canada, it is a small miracle.
As has been laboriously stated before, the tax credit is the only hard money out there for film makers in this country. It is even more critical for new film makers like myself, and that is the majority of us. For small films, the legal fees involved with securing the bank loan against the tax credit makes the exercise nearly a zero sum game. We cannot afford them, so we have to find someone willing to guarantee that loan without using lawyers. For Sheltered Life, that was my father. With first-time and second-time film makers, it is family or friends that make it possible and who share the risk. It is not like we have a choice.
We received Telefilm's positive response only a week before our cameras rolled, four weeks after pre-production had commenced. By that time, we had already spent a lot of money. If we did not have a loan against our tax credits, there would have been no money to start, no money to secure locations, buy consumables, set props, wardrobe, set up an office, in my case, in my mother's garage, no money to hire anyone, and no money to pay a bond on our cast for the union. If we had waited until Telefilm's response to start pre-production, we would have had to push the film to the next year because of the availability of our cast. Getting a film actually made requires the strength to pick a date and stick with it. If you can put things off until next year, it happens the year after and so on, and your film never gets made.
However, even with Telefilm involved, we had a gap in our financing that I had to plug with something. Telefilm is not allowed to invest more than 65 per cent of the equity in a low-budget film, and it is fewer percentage points for bigger budgets, so I had to invest all my directing and producing fees back into the production budget, and so did all the other five producers on my film to try to close that gap to complete financing, to trigger Telefilm's money. Because our fees were deferred, we could not factor those into our tax credits, which dropped their value. Admissible labour is only counted based on cash payment. The gap was smaller, but it was still there and, at the end of the day, my father had to save the day again by helping to eliminate that gap at a much higher risk than the loan he had already guaranteed against the tax credits. This is no small or easy thing to ask of a family member.
We only make my fees back if the film makes sales in the marketplace. Everyone else gets paid except for the film makers. That is how it works in Canada for the vast majority of us. Very few films are actually able to pay the fees of the producers or the directors, or even small portions of them. In a very real sense, we the film makers do not directly benefit from tax credits; however, because of them, we are able to employ our casts and crews, which are usually large.
On my tiny film Sheltered Life, we had 44 people in our production crew, 17 actors, and in post production we employed at least another 25 people. Everyone was paid except the film makers. Larger films and television shows employ many more people than that, and put food on the table for, at the very least, 125,000 Canadians families a year.
If the Minister of Heritage thinks our film is offensive, then what happens? Well, we do not get the tax credits. Thus, we do not qualify as a Canadian film, so we have to give back our Telefilm money and our BC Film money. Who gets to do that? We have already spent every penny of it. I guess the Minister of Heritage would have to explain to my father why it is important to try to bankrupt our family because our film offends her. This seems rather cruel and unusual to both of them. I would not envy anyone explaining that kind of thing to my dad. Even though he is a staunch Conservative, I suspect he would not understand how this treatment of the situation was Conservative at all.
Banks do not make much money on financing tax credits for film and TV. If a single film defaults on their tax credit loan, it would take between 50 and 100 such loans to pay for that single failure. We only make a few hundred films a year in this country, and there are only a few suppliers of tax credit loans to the industry. By my calculations, and I am not an expert, one single film's tax credit being revoked would wipe out somewhere between one quarter and half the annual banking profits for our entire industry.
The Minister of Heritage has said that she is considering revoking only a handful of films' tax credits a year. Clearly, this spells ruin for us all. In fact, if film and television tax credits are not guaranteed, if the Minister of Heritage is allowed to revoke them for any reason short of criminality, banks will not loan money against them for anyone. It is pretty simple.
The bank loan again the tax credit is the cash we use to start film making. With no cash, there is no filming. No film makers means no films.
The argument has been raised that if our content is deemed contrary to public policy we can make our films with our own private money. Especially when it comes to first-time or unproven film makers helming a project, there is literally no chance of finding such money with the exception of the film makers themselves, should they be lucky enough, and their immediate family and friends. Knowing, surely, that films cost multiples of millions of dollars to make, this limitation makes it possible for only the voices of the truly rich to be heard as our nation's cultural expression.
Canadians, as I understand them, being one of them myself, are not interested in limiting our cultural expression to solely the expression of the extremely wealthy. Film, like any art, is a medium that should be allowed to express the dreams and realities of all our society, and especially the world of the majority of our population, the hard-working Canadians whose tax dollars are used to help raise our own voices to speak to our own country and the world at large through our nation's cinema.
Sheltered Life was hard to make. It is a film set in a women's shelter, about violence. It is an ensemble film, with 13 of our 16 actors being women. We failed twice in raising the financing to make our film before we were able to bring it together in Vancouver. Those two times we failed, we were stopped because various people involved in the project selection process disagreed with our content. One such reader's report included the phrase, ``Call me a honky, but I do not believe this white character would befriend this non-white character ever, let alone as quickly as is done in the screen play.'' That reader's report removed tens of thousands of dollars from our film's budget. This is an example of the kind of biased subjective censorship we already face.
Based on the personal bigotry of various individuals in our industry, it is already very difficult to make a nuanced socially conscious film. I would like to see this kind of censorship reduced. The implications of Bill C-10 are the opposite. It adds a new level of censorship on top of all the other ones we already have. It leaves open a new level of subjective personal censorship, not one fewer. The only difference is that this time, the censor will likely bankrupt the film makers and their families and anyone else who has been valiant enough to help finance their film by guaranteeing them at the bank.
The government insists that this new measure is to inhibit the production of some films that are contrary to public policy. They apparently agree with some special interest groups and lobbyists who feel that beyond the Criminal Code, some new moral and ethical standard should be described and employed to limit the films we make with taxpayers' money.
Any moral and ethical standard employed to limit filmmakers expression, in particular the way it is being proposed in Bill C-10, is itself morally and ethically bankrupt because of the damage it will do to our industry, those who work in it, and the friends and families of the filmmakers who try to help them. These special interest groups say that they stand for family values, but what kind of family values are those that destroy so many real actual families?
The film selection process is already a minefield. Bill C-10 sets a new mine in that field that will take out the last remaining footpath we have to cross the field. The only people allowed to make films in this country will be those rich enough to build a bridge over it with their own personal fortunes, or the Americans and other foreigners who will be given access to our hard-working Canadian taxpayers' money through a back door. Their films, no matter what they are about and how offensive they are, will be subsidized by our tax dollars. That truly is the most disgusting thing.
Thank you for your attention and the time and opportunity to voice my concerns and speak freely.
The Chair: Thank you, sir, for a most revealing presentation.
[Translation]
We will now move on to questions.
Senator Fox: I will ask Ms. Pradier some questions and then I will come back to Mr. Laudan. Ms. Pradier, I see that you represent 2,800 sound and image technicians. We have to realize how important the film industry is because it employs so many people with a range of skills. One of the reasons Montreal attracts so many domestic and foreign productions is because people recognize the skills your members have, not only in Montreal and Quebec, but also elsewhere. Can you speak to that?
Ms. Pradier: That is right. I would say that, given the number of domestic productions we work on, versus the number of foreign ones, be they American or co-productions with Europe, Quebec is doing fairly well, because there are so many productions in our province compared to elsewhere in Canada.
As a result, our industry is very dynamic because we work on American productions and learn state-of-the-art skills from them. These skills are reinvested in our domestic productions, and even though they are smaller in scope, they give rise to a lot of creativity and know-how. It all goes back to the Americans. The fact that we have such a strong domestic industry helps us to maintain a consistent level of productions and a balance, which allows for a relatively stable industry. This year in particular, for instance, given the much lower number of American productions in Canada because of the anticipated actors' strike in the States, the parity of the Canadian dollar, and new tax credits south of the border, Quebec is still able to weather the storm because of its vigorous domestic film industry.
Senator Fox: I should have begun by thanking you for being here today. We truly appreciate it. We heard from several industry organizations, such as the APFTQ and the SARTEC. I also wanted to hear from the unions, because they are extremely important to us. Speaking of unions, I do not want to change the subject, but was an agreement reached with the Alliance québécoise des techniciens de l'image et du son, or is that still an ongoing issue?
Ms. Pradier: We are still working on it. On May 15, a bill to amend the status of Quebec artists was tabled. Some lose ends remain to be tied before the bill can be applied. We are waiting to see whether the bill will be adopted this session or next fall. We are in the process of tying up all the lose ends.
Senator Fox: The Mayor of Montreal appeared before the committee to talk about how this bill could deal a severe blow to the industry because of the negative impact it would have. Do you basically have a monopoly on domestic productions?
Ms. Pradier: Yes.
Senator Fox: It is also important to attract foreign productions because they represent a challenge to your members. If I understand correctly, some of these foreign productions are so big that your members can give full flight to their creativity. Do you think there is a problem with regard to how competitive we are? For example, we have learned that the State of Michigan is offering tax credits of 40 per cent. If you factor in the strength of the Canadian dollar, and so on, do you think that this bill will make Montreal more competitive or simply add to the problem you have described?
Ms. Pradier: There is no doubt that having two types of production — domestic and American — definitely creates a great deal of dynamism. Foreign productions give us access to new, advanced technologies that we may some day be able to use in our work. This also creates a production volume that allows us to maintain post-production service centres that can handle all sizes of productions. There is no doubt that this is a very significant contribution.
Earlier, I was talking about the inequity as regards standard productions or co-ventures. I think that this is unacceptable at the outset from the point of view Canadian citizens. We are not talking just about production, there is also an issue involving product use. Once we jeopardize domestic production, we will clearly be benefiting American production.
Senator Fox: It is true that we could find ourselves in a rather strange situation in which a Canadian or Quebec producer wanted to make a film in Montreal, but there would be a fear that it might not meet the new criteria developed by the minister. The same film could be made by an American company in Montreal and get the tax credit.
Ms. Pradier: Absolutely.
Senator Fox: I have another question. You quoted the minister. I remember roughly what she said. She said that although they are legal, some films should not receive subsidies because this would be offensive. That means that there would be films that are neither pornography nor an undue exploitation of anything at all, nor offensive under the Criminal Code, and yet would be considered unacceptable. I am not asking you to repeat your testimony, but you did say that this was the sticking point.
As long as deciding how to judge these films, most witnesses said that they could agree that public monies should not be used for pornographic productions. That is already in Telefilm Canada's regulations on tax credits — films are to be in compliance with the Criminal Code. Would you accept these guidelines, in compliance with the Criminal Code and no pornographic productions — in other words, all films that meet these two requirements would not be offensive?
Ms. Pradier: In our opinion, given what is in the Criminal Code, if someone produces a work that would incite hatred the people who produce the work could be charged. What I find incredible is that decisions about what is offensive and what is not offensive will be made in an office somewhere.
Senator Fox: That is what is being proposed.
Ms. Pradier: I find that unacceptable. We trust our elected representatives to pass legislation and implement it. I do understand that that is the system we have, but we are operating with a parallel system, and that is what I find unacceptable.
[English]
Senator Goldstein: We have heard, and you just said a moment ago, that the bulk of the milieu would be content and consider it appropriate that films that offend the Criminal Code should not be supported by government tax credits and films that are pornographic should not be financed this way. A type of film that is not envisaged by the Criminal Code, nor pornography, is a film that contain extreme violence. Would you see the possibility of adding to the Criminal Code issue and the pornographic issue, a prohibition or a non-granting of tax credits for films that contain scenes of extreme violence? If you would consider that appropriate, how could that be defined or delimited in a way that would avoid anything that was discretionary or arbitrary? It is a tough question, but we need to know the answer.
Mr. Laudan: Was the question specifically regarding violence?
Senator Goldstein: Many movies are violent, and that is a reality. Roadrunner is also violent, and some of us let our kids watch it. I am talking about extreme violence.
Mr. Laudan: Extreme violence is in all kinds of films, mostly from the United States. The violence that we put on our screens tends to be a little more visceral, a little more realistic and in some ways, with David Cronenberg, perhaps, more fantastical. I do not think there should be any kind of limiting of that for the same reasons I suppose you do not want to mess with the ability to talk about things realistically. The opening of Saving Private Ryan, for instance, is extremely violent. I do not think I have seen anything more violent than that. It was shocking, and it was supposed to be.
I remember a British film maker who made a film and got in a lot of trouble because he had a rape scene that lasted for three minutes. The movie was called The Baby of Mâcon, and he was castigated for it in the U.K. I was living there at the time. He had a screening of the film, and I went to it. He responded to the criticism by merely saying, ``Look, it is a rape. It should be disgusting and hard to watch. The fact that it is and that you are responding so largely to this is a good thing.'' I would say the same thing to any kind of regulation that could be drawn up that would inhibit our ability to speak about reality to our audience. It would be a very silly thing to do. I do not think it is possible to do, either.
Senator Goldstein: Let me deal with that. We do not like hate speech, and it is contrary to the Criminal Code, but that is also reality. We have plenty of that, unfortunately, in Canada. Other things are prohibited in the Criminal Code and are reality. You are not suggesting that anything that reflects reality should be permitted tax credits in a movie or film video production?
Mr. Laudan: For me, most of the time when I have seen violence or nudity that is border-line pornography in films, it is there for a pretty good reason. The film makers are actually trying to say something with that. If they are not, if they are just being salacious and are merely interested in making money from the spectacle, then that is a very different thing. I believe that is already contained in the provisions for tax credits, especially with pornography, but not with violence. Then again, we are in North America, and we tend to be more prohibitive of sex than violence generally.
[Translation]
Senator Goldstein: Would you agree, Ms. Pradier?
Ms. Pradier: Yes, absolutely. I do not want to repeat what I have said, but that is the same thing.
[English]
Senator Tkachuk: Thank you for your testimony today. Ms. Pradier, you mentioned that film is part of the cultural industry. Are films part of cultural industry or are they entertainment industry, or are they the same? Is entertainment culture?
[Translation]
Ms. Pradier: There is a big debate on this issue. Obviously, we think that filmmaking is first and foremost an art, just as photography is an art. If a photograph is used in an advertisement, does that mean it is no longer art? I do not think so. However, the Americans have developed this industry in such a way that the vast majority of what they produce is first and foremost entertainment more than anything else. Nevertheless, in film, there is always a pictorial or composition or other artistic elements involved. Does the fact that we have managed to develop an industry that can pay people wages mean that this is no longer culture, that this is no longer art? I do not think so.
I think that even if a production is to have very broad distribution, it nevertheless carries a message, and thus it can be considered culture.
[English]
Senator Tkachuk: You mentioned photography. I was watching television on Sunday, and a photographer was being interviewed on Fox news. He was the photographer who was on the train, because it was the anniversary of when Bobby Kennedy was being taken to the grave site. The pictures he took were incredible. They are art. When you saw it, you knew these pictures were art. There are many pictures taken, however; my son has had pictures that are not art, they are sunset pictures. Is it not the same in your industry? There are people who make films that contribute to the culture and there are people who make films that denigrate the culture.
I am not talking about censorship. There must be some level or threshold above the Criminal Code. I will come to that in a moment with Mr. Laudan. Many films do not contribute to the cultural venue. They purport to be entertainment and some are more based than that but, certainly, they do not contribute to our culture.
[Translation]
Ms. Pradier: I think that the contribution to culture occurs in the same way it does in any art form. Art is art, but it becomes culture once it conveys a message, and in order to do that, there has to be someone to receive the message. Culture transmits meaning — there is someone to send the message and someone else to receive it.
Are we saying that a less good message is harmful to culture? We can identify that the sender of the message has this type of message to convey. Do we think it is less worthy or better? The important thing is the reaction it evokes in the person receiving the message and in the various people who receive the message and can talk about it and discuss the issues it raises. If society unanimously rejects this type of message, at least society will have taken the responsibility for thinking about the issue and will have made a step forward. Bill C-10 would make this decision for society at large. That is what I am saying when I talk about standing in the way of a message and a public discussion of the issue. The bill would stand in the way of the public discussion and decision that films represent for Canadians.
[English]
Senator Tkachuk: I do not necessarily agree, and that is why we are having these discussions. As I said earlier to Mr. Laudan, I find it most interesting to see if there is a business case that would hurt the film industry.
I have two questions, and you can both answer. If the bill is not passed now and sits in no man's land until the fall, the film industry will not know one way or the other what is happening. Could the film industry endure that until September? This bill might pass in September or October but in the interim, filmmakers would be losing time.
Mr. Laudan: I was recently in Cannes, where I had many conversations with international producers and foreign national government agencies within the entertainment business, and film specifically. They were concerned because they have national productions that are co-produced with Canada. Of course, if this bill passes, then those productions go south. They are looking at losing a great deal of money themselves. Their filmmakers are having to consider refinance their entire movies. At times, a movie can take 10 years to finance. Yes, there is some worry, but we cannot stop doing our work and just wait for this to go one way or the other. We will plough ahead.
Senator Tkachuk: In the meantime, you will make application, as you did for your film, under the present guidelines. I obtained the application form for the Canadian Audio-Visual Certification Office, CAVCO, which says Canadian Film or Video Production Tax Credit Guidelines.
Mr. Laudan: Luckily, I do not have to do that because my producer does that for me.
Senator Tkachuk: ``Excluded production'' means a film or video production or a prescribed taxable Canadian corporation. It outlines the criteria: Canadian citizen, permanent resident, Canadian-controlled corporation. There are a number of interesting exceptions which would mean you do not qualify: pornography, sporting events, productions that solicit funds. One very interesting line says ``a production for which public financial support would, in the opinion of the Ministry of Canadian Heritage, be contrary to public policy.''
This is the application that Mr. Laudan filled out.
Mr. Laudan: I did not fill that out.
Senator Tkachuk: Whoever. All of the other film producers fill out this application to get their tax credit. In the application, there is a number. I will provide this to the clerk. You can go to the website and find it. I am simply telling you it is on the website. I am becoming more interested in this question as we go along. There are all kinds of exclusions, such as a talk show, a sports activity or a gala presentation. This most interesting last point says ``a production for which public financial support would, in the opinion of the Ministry of Canadian Heritage, be contrary to public policy. That is the application that is filled out now for the tax credit.
Senator Fox: Is there a corresponding section in the Income Tax Regulations?
Senator Tkachuk: This is under the guidelines for the current application to be filled out. It is exactly the same provision on public policy. The guideline has to enforce the law. In other words, the minister could say, no. It has nothing to do with the Criminal Code. It has not affected the film industry to date. You have your film credit and other people have been getting their film credits. Do you know what will happen if this bill is not passed until the fall? People will continue to get their film credits.
I am not saying it is unimportant. I am simply trying to understand what would be so different when the bill passes.
Mr. Laudan: The statement from the Royal Bank is fairly clearly in stating that they do not know whether they will be able to support the film industry if the minister turns any films down after they are made. She has not done so yet. If the guidelines were such that she could turn a film down right now, then it would be the moment that the banks would turn off the switch on the film and the television industries in our country.
Senator Tkachuk: The fact that it is there prevents filmmakers from abusing the system. In reality, if you rely on these applications and make something that you signed you would not make, then they can go after you and disallow the tax credit at the end of it all. That is what happens, and that is why you fill out all this paperwork.
Mr. Laudan: Certainly, but no one has done that yet.
Senator Tkachuk: Exactly.
[Translation]
Ms. Pradier: Is there a difference between the guidelines and legislation regarding the implementation of the regulations?
[English]
Senator Tkachuk: I think I get to ask the questions.
[Translation]
Ms. Pradier: I am not rigid, but I do think there is a difference. I apologize.
[English]
Senator Tkachuk: The question has been asked and is in the committee evidence. Maybe a lawyer could tell the difference, which is not much.
Senator Jaffer: At the moment, they are just guidelines and the minister does not have the backing of the law. Is that your understanding?
[Translation]
Ms. Pradier: If this is in fact included in the guidelines and has not been defined more clearly, what I understand is that there have been very few examples. Since the introduction of these tax credits, one or two films — the titles of which I do not know — would not have been eligible for the credits. I am not familiar with the nature of these films, but I am sure that the minister, who would have the discretion to withhold the tax credits, when the guidelines are vague, must have a really extraordinary reason and a very different one in order to do what is suggested here, namely to include this in the legislation, and work on guidelines after the fact.
If we are going to reopen the debate about morality in Canada, how many years are we going to spend on it before we can establish guidelines that can be implemented? I think enough consideration has been given to the subject to allow us to come up with our current laws and our Criminal Code, which we can use as reference.
[English]
Mr. Laudan: A slightly different question was posed earlier by Senator Tkachuk. It was about content for Canadian culture. You were using the term ``culture'' in the sense that bad movies do not help our culture, they hurts our culture.
Senator Tkachuk: I have seen a lot of bad movies that do not hurt our culture. She might get upset because it is my question and she wants her question answered. Go ahead, Senator Jaffer. I can talk to Mr. Laudan after.
Senator Jaffer: Please finish.
Senator Tkachuk: I was trying to say that there are movies that perhaps denigrate our culture. They do not add to it but subtract from our culture. To me, most movies I like are just entertainment. I do not think they have anything to do with my cultural attitude. They are just entertainment. They are great. I love going to movies.
The Chair: It is quarter after 5. We have l'Union des artistes, and they have some restrictions on their time. Senator Ringuette has not had her chance yet. Could we get through this and get to the next witnesses?
Senator Jaffer: I have a very short question. Just to understand, when you go to the bank, at the moment, you just hand the business case to the bank, and you do not talk about the content of the movie, do you?
Mr. Laudan: No. The whole point of the tax credit in the first place was that it was an inducement to the film industry to employ Canadian people. That is all it was. It is nothing about content. It is the same thing with the bank. They are just money people who are interested in making money. That is great. They finance these tax credits. The last thing they want to enter into is any kind of creative discussion about the film. It is not their job. Interestingly, I do not think it is the government's job, either.
Senator Jaffer: If the minister, as she offered, had a committee that would look at the guidelines, how would the bank deal with that?
Mr. Laudan: I would not be dealing with the bank, because if she had one, no bank would talk to me.
[Translation]
Senator Ringuette: Ms. Pradier, I would not want to give you the impression that Canadian parliamentarians, both the elected ones and the non-elected ones, do not distinguish between guidelines and legislation. There is a fundamental different between the two.
You represent many members. We have heard many times that the various programs, both provincial and federal, are very important for the infrastructure that has been developed for about the last 10 years for the film industry. You have been working in his field for quite some time. How would the industry be doing and how easy would it be for your members to find jobs if these provincial or federal programs were not in place?
Ms. Pradier: I cannot even imagine what it would be like. I do not think we would even have our industry, which requires such a tremendous amount of funding in order to function. I am not aware of many industries that can invest seven, eight or $10 million only to disappear six months later. Ours is a very unique industry that requires huge investments. Until the product is finished, it is like a prototype. We make prototypes. We produce a single product that will be distributed. Until it is distributed, we do not get one cent in revenues. I can imagine that the industry would be like without tax credits and without government support, and that goes both for francophones and for anglophones, who have to deal with competition from some absolutely fantastic American productions. Fortunately, we have the language barrier, but sometimes that presents challenges as well.
Senator Ringuette: Look, you should not feel uncomfortable because the film industry needs some help from the government. It is definitely not the only industry that receives government support.
I have a very important question for your, Mr. Laudan.
[English]
I appreciate you being here today because you represent a certain group of young Canadian producers that needs our respect and our support.
Mr. Laudan: Thank you.
Senator Ringuette: I will probably never know to what extent you had to live in poverty, as you said earlier, risking a good portion of your life to, at the end of the day, make money, hopefully, but, if not, at least get your message out. I appreciate that you are devoting your time to do that.
One of the big concerns I had when Minister Verner appeared before this committee was whether they had done an economic impact assessment of what this proposal would do to the industry. She could not answer, and she referred the question to her official, who said no. Essentially, no economic impact study was done before going ahead with this bill.
What can be done so that you, in the line of production for a film, would not be the last one to be paid?
Mr. Laudan: The tax credit could be used for its original purpose, which was to support filmmakers and film production companies between productions. After a film was made, they would receive a cheque 18 months later that would finance them between productions because it is difficult to keep things rolling.
Inevitably, because it was solid money, Telefilm Canada and the other government loaning agencies required it to be part of the financing structure within projects so we had to borrow against it. That, I believe, is traditionally what has happened. It would be great if the tax credit were increased so that we would be able to borrow more against it and reduce the ever-existent gap so we do not have to risk potential bankruptcy of our family and friends just to make a movie.
Loosening up would also be good. If the real problem is that the government does not want to support arts financially, I can understand that kind of feeling. Films are expensive and they are a cultural item. It is a lot of money but I was always under the impression that tax credits made money. I thought the government gave us tax credits as a reward for employing people. We were creating four times the economic activity with every dollar we spent on labour in film and television. They are making the money back and more, are they not? That is what I always thought.
Senator Ringuette: That is why they gave the same tax credit to American or other foreign productions in Canada without any kind of censorship.
Mr. Laudan: Right. It is a win-win situation as it stands. I do not understand the problem. One solution could be brought back from the past is if we allowed private investors some safety or a kind of inducement for investing their money in films, so we would have more private investment. The biggest problem in Canada with reliance on government financing is that there are no private investors. If there were a tax shelter or inducement for private investors to put money into the film industry, it would relieve some of the pressure on the government to support us.
The Chair: Thank you.
[Translation]
On behalf of all the members of the committee, I would like to thank you for your testimony and for your contribution to our proceedings. It will be most helpful in our consideration of this issue.
[English]
Senator Fox: I would like the witnesses to hear a brief point of order. Senator Tkachuk read into the record a document from CAVCO that said an excluded production was one that did not meet public policy. That is in the CAVCO document, which is an internal ministerial document. It is not in the Income Tax Regulations. I have a copy updated as of May 19, 2008. Clearly, the department wants to remove the CAVCO non-regulation out of their guideline and put it into law. That makes a significant difference. I just wanted to make that point.
The Chair: That is a very good point.
[Translation]
The Chair: We are very fortunate to have two representatives from the Union des artistes from Quebec with us today. They are Ms. Anne-Marie Des Roches, the Director of Public Affairs at the Union des artistes and the president, Raymond Legault.
On behalf of all my colleagues, I would like to welcome you. We are very interested in what you have to say.
Raymond Legault, President, Union des artistes: Thank you very much for giving us an opportunity to present our position. Anne-Marie Des Roches is the Director of Public Relations and is also involved in reception services. That means she often hears our members talking about their working and living conditions. Technically, she has done a great deal of work with the CRTC and with a number of government bodies. She may not be an expert but she knows very well the current regulations. That is very helpful to us at the Union des artistes.
I would like to conclude my presentation by saying that, for the past year, I have been the president of l'Union des artistes, for the past 10 years as vice-president and, I have been on the board since 1992.
I have taken over the duties of President of the Fonds d'investissement de la culture et des communications, which, given the context, could prove interesting. I am also the chair of a committee on the socioeconomic conditions of artists in Quebec City, with the Department of Culture, Communications and the Status of Women.
I would have liked for the 11,000 artists to be here in this room, but it would have been a little small. The Union des artistes represents singers, dancers, program hosts and of course performers. We have 7,000 members, 3,000 trainees, for a total of 11,000 artists.
We would like to address various issues; Bill C-10 as a whole does not bother us, rather, it is various aspects of the bill dealing with audio-visual productions and particularly the tax credits granted based on public policy criteria.
First, there are various aspects of the bill that we want to highlight and with which we are in agreement, since we were at the head of the line. We support everything that relates to and that favours greater transparency with regard to the granting of tax credits in the audio-visual sector. We were first in line during the Cinar affair. We continued to demand that information on works that had received public funds be published. Transparency is essential and prevents slip-ups — in some cases, fraud — from occurring.
Tax credits are an essential tool for the audio-visual sector and, naturally, we want to ensure that there is no more misrepresentation of authorship. All amendments to former section 241 — the new clause 186(2) — enabling the publication of the identity of beneficiaries of tax credits and the names of the principal creators associated with the production are welcomed.
Now, we are less delighted with the second part of the bill. You have heard people talk about it for weeks, a number of artists and artisans have testified before your committee. I heard the President of the Alliance québécoise des techniciens de l'image et du son, Ms. Pradier, speak. She talked about darkness and light.
The Union des artistes has selected a different image, I want to use Pierre Lebeau's — a very well-known Quebec film actor — he was unable to be here today. His image was rather that of a rose and its thorns. It is always nice to film a rose. Seeing a rose might be something that we are most interested in, but we cannot forget that, with a rose comes thorns and sometimes the thorn is the least agreeable part. It allows the rose to be so beautiful.
Freedom of expression is a fundamental value for the Union des artistes. I think that Canada has always promoted freedom of expression. It must always be a fundamental right: freedom of expression and democracy. These two things are essential to the creation and development of our cultural expression and should not be subject to subjective criteria of any kind.
I have just returned from Banff where the Banff World Television Festival was being held. One of the keynote speakers, Richard Florida, wrote Who's Your City? In this latest book, he talks about the openness of a society. A society's openness to creativity is likely what makes it most dynamic. I will spare you his presentation of satellite photos of places where there was more light and that showed the most active and open cities. He came to the conclusion that the more open a society was, the more tolerant with regard to its norms. He even managed to establish the fact that a certain percentage of gays living in a city would lead to greater economic activity and greater economic progress for those cities or countries that were open and tolerant.
The rules are important, in our opinion, and obviously there will always be rules. All institutions have regulations: the Union des artistes is not exception. We demand that clear rules be established for the hiring of Canadian artists to create audio-visual work.
For example, SODEC, which manages tax credits for Quebec, has rules and even a list of the types of shows that may not benefit from tax credits. Telefilm Canada also has rules, as does the Canadian Television Fund. Pornography and violence can be dealt with under the Criminal Code. I am repeating no doubt, comments you have already heard, but there is no collusion. The same is true of hateful comments.
Why then use legislation on taxation for the granting of tax credits for audio-visual productions to regulate an issue that is already regulated by other legislation? Why this desire to meddle with the very foundation of artistic freedom? Were there problems before this amendment or this amending bill was introduced? Are there already too many films? Whenever there is an excess, as there was for example with the misrepresentation of authorship, society reacts and governments decided to put the brakes on. There has never been any censorship or such guidelines. If these are guidelines, they should be set out in legislation. Things ultimately work out and this shows an openness and tolerance for all the subjects that can be dealt with, even if some of the subjects can be extremely painful sometimes.
I want to go back a few years. You can think of Mourir à tue-tête, a film on rape with some extremely violent scenes. If we are to apply the criteria regarding various types of scenes that should not be shown due to their violent nature, how can we condemn something so intolerable as rape?
If we use SODEC as an example, it will not certify films intended for adult audience and with explicit sexuality. SODEC will ask whether the writer, director and producer are experienced individuals. Is this film intended for distribution in theatres or on DVD? What is the market for this film?
That will make a difference for a film such as Borderline which was mentioned earlier. If a committee were to vet a film such as Borderline, which contains drinking and sexually explicit scenes, would this mean that once a film has been made, it could lose its tax credits? That would put an end to the film. I do not believe that the scenes in the film are necessarily there to show the situation of somebody who qualifies as borderline.
Another example is the movie October. This film had great difficulty obtaining funding from Telefilm Canada, because some people thought that it promoted terrorism. It is true that, upon closer examination or looking at the events of October, this is an extremely delicate subject. But no one who has seen the movie October has ever said, ``Tomorrow, I am going to become a terrorist.'' Rather, it is the story of four young men involved in a kidnapping that spirals out of control. The film focused more on human nature. I do not think that it apologizes for terrorism. On the contrary, not a single Quebecker who saw the film wanted to kidnap a member of the National Assembly or anyone else.
Senator Fox: A senator.
Mr. Legault: There are others for whom Cronenberg represents a great deal of violence. Indeed, there are some people for whom it becomes intolerable. I remember scenes that I watched in movies that I found to be intolerable, such as executions. For example, in Dancers in the Dark, at the very end, the person is killed and I found that intolerable. I did not even stay in the cinema.
At the same time, it is precisely that violence that affects me, and makes it possible for me to better appreciate the theme or subject of the movie. This is precisely the capacity of the artist to be able to affect his audience, even to the point that it becomes intolerable. It comes back to what I was saying earlier; when you are filming a rose, it is always lovely and when you focus on the thorns, it is sometimes somewhat less so. That may be what is most difficult to bear, but at the same time it is what makes the rose beautiful.
The other aspect that I would like to speak to is more down to earth. I think that some representatives of financial institutions have already spoken to you about it. As you know, financial institutions lend money for projects while they are waiting for tax credits to become available. If such a clause were to become part of the legislation, it could happen that a bank manager — or any person whom charge of loans or interim financing — would say, ``Yes, but it is no sure thing that your film will get tax credits, so you can understand that for me, I must either increase the interest rate or turn you down for the interim financing''.
This would have a major impact, and not only on films that may not, let us say socially, correspond to what a government or a sitting minister might prefer or not; it would affect all films. If I make a children's movie, a bank manager might say that this is not a big problem, but for a film like Borderline, I may have a great deal more difficulty getting financing. Therefore for other movies of this genre that are little bit more difficult, it would probably be harder to obtain interim funding and this will not affect just a single film but many.
Given that there has been no problem up to date, why add a clause that would threaten an entire industry? We feel that this clause creates more problems than it solves. Thank you for having heard me. If you could ask for that clause to be removed, I think that no one would lose anything, quite the contrary.
The Chair: Very well, sir. You have given a very interesting analogy with the rose and the thorns.
Mr. Legault: It comes from Pierre Lebeau, so I must recognize the author.
Senator Fox: Thank you for being with us; I very much appreciate the testimony that you have provided on behalf of your members. I must say that I was surprised at their numbers: 11,000 artists. They are primarily in Quebec, I assume?
Mr. Legault: We have approximately 450 members in Toronto, and there are perhaps a dozen in New Brunswick, but the majority of our members are in Quebec, that is to say 90 per cent of them.
Senator Fox: I do not have many questions to ask you because you were very clear in your presentation. If Senator Dallaire was here, he would say that the film Shake Hands With The Devil could qualify as an extremely violent film and that the violent scenes in the movie are not there to glorify the violence rather but to show that genocide is a real problem. There may therefore be extremely violent scenes, but they exist for a reason.
Mr. Legault: I am thinking of the movie in which Luc Picard spoke of the situation in Rwanda where we were seeing many Black people being mutilated by machete: A Sunday in Kigali.
Anne-Marie Des Roches, Director, Public Affairs, Union des artistes: Which, in passing, was shot in Rwanda.
Mr. Legault: I do not think that would inspire anyone to commit genocide, nor that it is gratuitous violence.
Senator Fox: We are here because the minister, in her statement, said that she is not satisfied with the Criminal Code guidelines and the definition of pornography as it is very clearly described in the Income Tax Regulations for tax credits. There was therefore an opening to say that there is a category of movies that, without being prohibited under the Criminal Code or of being pornographic, should not have access to public funding. You have already given us your perspective on that. Obviously, for these movies, we can move in that direction but there are also other parameters like the market. Do you have any comment to make on that subject?
Ms. Des Roches: Mr. Legault has made some reference to this. When movies are viewed and analyzed, we try to look at the producer's, director's or author's background and try to understand their intentions. When SODEC writes that there are no tax credits for adult movies because erotic movies are intended for an audience that is 18 years and over, we know that this is for the DVD market. They are not necessarily censored, but adult movies will not be subject to the regulations. No one is against that and that has never prevented a producer like Roger Frappier from supporting a movie like Borderline or Mourir à tue-tête for the NFB. There are natural boundaries that we do not even need to set out in any legislation.
Senator Fox: Most of the witnesses who appeared before the committee have been unanimous in saying that they agree with the following statement: public funding should not be used to assist in the production of pornographic films and beyond the definition of pornography, there exists another guideline which is the Criminal Code that reflects the values of Canadian society. Do you agree with these guidelines?
Mr. Legault: Yes, I accept them. I have a comment to make on your previous question. You talked about tax credits that would be withdrawn in the case of certain films, but not in the case of American productions. There is an inconsistency there. We are becoming more demanding of ourselves than we are with films — and I am talking about the United States because this is unfortunately the case, that other societies can produce.
Senator Fox: I have a final question. I am happy that Senator Tkachuk is back because we had a little imbroglio earlier on. Senator Tkachuk read the CAVCO documents on the departmental website, where it was indicated that some categories are excluded — we know that varieties are excluded as is pornography — and it concludes by saying that this is equally valid for any film that, in the opinion of the minister, would not respect public policy.
I noted that this part is not found in the Income Tax Regulations at this time, and that therefore the department is publishing something that does not exist in the Income Tax Regulations on its website.
[English]
We have the application form under CAVCO. The only thing the producer subscribes to is that he undertakes to respect the regulations of subsection 1106.1 of the Income Tax Regulations, which do not include the part on the website. I want to put that on the record for clarification.
If I am wrong, I would love to have the researchers look at that. The CAVCO website says something that is not in the Income Tax Regulations and the CAVCO application form does not require you to subscribe to the website formulation, only to section 1106 of the Income Tax Regulations and it is not in there. I can only conclude that they are taken out of there to be put it in the legislation. If there is a purpose, it is the one that the minister indicated clearly before us.
Senator Tkachuk: We should clear this up.
Senator Fox: That is the application form.
The Chair: Do you have further questions, senator?
Senator Fox: I have no more questions and no more statements.
The Chair: That is fine. You have controlled yourself relatively well today.
[Translation]
Senator Ringuette: I would first of all like to thank you for having come. We greatly appreciate your comments, particularly those concerning transparency.
If memory serves me well, without challenging the other testimony that we have heard, few people mentioned that specific reference to the need for transparency, that is to say that the population of Canada should be able to find out who has received public funding for their production. I think that is quite right and I thank you for having raised that point.
In the end, you have certainly drawn the same conclusions as other witnesses we heard from. We wanted to know if people in the industry had contrary opinions and we wanted to hear from them. We have not heard contrary opinions from the industry as far as the guidelines are concerned, that is to say that everyone agrees that films involving Criminal Code offences or pornography should not be granted tax credits. Furthermore, even those who fully supported the bill and who did not come from the industry proposed the same guidelines. Therefore, the message is clear from all of the stakeholders.
In conclusion, I would like to thank you for having come to add to all of that and also for having raised the very important issue of transparency.
Senator Goldstein: Thank you for having come to appear today. According to the Telefilm Canada guidelines, I see the following sentence — and I am sorry I only have it in English — and I quote:
[English]
. . . not contain any element of serious and gratuitous or explicit and excessive violence, any element which is predominantly characterized by the undue exploitation of matters of a sexual nature, or matters of a sexual nature and one or more of the following subjects: crime, horror, cruelty and violence, or any other sexual offence under the Criminal Code or any matter which is libellous, obscene or in any other way unlawful.
[Translation]
These are the guidelines that have existed for decades. I therefore ask myself the following question: Why has the industry in general reacted so strongly?
Mr. Legault: Before the tabling of this bill, we would refer to the public policy. For us, the public policy referred to what already existed. We did not see any interventions other than on quotas, on the numbers, that is to say on the Canadian points system that ensures that a production is recognized as being Canadian so long as there are a certain number of Canadian actors and that a certain number of production components are Canadian. I do not know how the government functions, but I know that at l'Union des artistes, we have statutes, regulations and guidelines. To put it in a nutshell, we refer to the guidelines. The bill deals with everything that is gratuitous. The industry has no problem avoiding gratuitous violence. Furthermore, when Telefilm Canada is making a choice, they can say at any time, ``We do not subsidize that kind of film.'' That does not cause us any difficulty.
Having said that, to go from there to putting it into the legislation represents an enormous difference. Projects are assessed daily, on a case-by-case basis. However, we believe that this kind of legal guideline would allow anyone to argue that pursuant to such and such section, a film could not be shown on the big screen. That is what is creating a profound malaise within the industry. It is normal that there should be guidelines, but according to the whims of society in general and the political climate, a film could undergo a major shift.
Furthermore, I would say to you that even within the artistic world, generally speaking, there are subjects that are not often dealt with. September 11, for example, took a long time to become the subject of a movie, because it was too sensitive and delicate a subject. And yet, that is not a question of censorship. Moreover, I would say to you that there is an intrinsic morality that exists within our society. Do we want to reduce this morality to two or three lines, or on the contrary, do we want to leave it open enough that it can breathe and show its openness to all kinds of things? That is the role that artists play in our society.
In addition, the process used to obtain a tax credit is so lengthy that this act would be superfluous, especially since, in the case of Telefilm Canada, when we begin the process of applying for tax credits, the movie has already been completed. If the grant application was done before the movie, that would be one thing, but that is not the case.
Senator Goldstein: Thank you, your answer reassures me.
[English]
Senator Tkachuk: In Quebec, when you get tax credits, are there not any public interest provisions? There are a number of provincial governments that have public interest guidelines of some kind.
Ms. Des Roches: I did not see any public interest guidelines, as I stated before. It was mostly adult films or reality shows, just a list of shows that will not receive a credit.
[Translation]
The public interest, for us, especially in the context of tax credits, is perceived much more in terms of public policy that is in compliance with Canadian content, residence, and regulations in force. In Quebec, to be entitled to tax credits, people must not report false information; for example, they must have lived in Quebec for more than six months. There are a great many reference points, and we feel that public policy and the public interest are among those. I do not see public order as being the same thing as public policy, from the outset. However, it has always been interpreted in this way: Is it compatible with the purpose of this funding tool?
[English]
Senator Tkachuk: We have had a great deal of discussion about this, and we are trying to find some way to achieve clarity in the application process so that the industry knows what the rules are. Is there any way to achieve clarity that would be a little more than the Criminal Code, which is the lowest common denominator? Surely taxpayers' dollars deserve more credit than that. Is there a way that we can achieve clarity in this bill? We have discussed this matter a long time. Everyone here wants some kind of measure or amendment or something that will achieve this, and we are, of course, open to it. We have had many discussions on this, and we kind of are going around and around. We know what to focus on. Is there any way you can help us with that? You might have several months to deal with it.
Mr. Legault: Why?
[Translation]
Mr. Legault: My only question is, why was there a problem? There was a problem concerning transparency and there were amendments made to the act because there was a problem. But I do not know what the problem is, I do not understand. Can you name me on movie that received a tax credit, that created a problem and, in general, caused a scandal?
Have you ever heard of a film like, for example, Les hôtesses de l'air en goguette, that was made with tax credits? I do not understand where the problem is. The introduction of this clause is causing more harm than good. I am trying to understand what its advantage is. I understand that the minister wants to step in because, as she says, we are talking about taxpayers' money. But if public funds should not be used for this purpose, then why, don't the tax credits apply to American or foreign productions? There is something that does not mesh here!
I do not understand why this clause exists and what it is seeking to prevent. Taxpayers' money from being improperly spent, perhaps? I am going to come back to an example that was already used: should the tax credit granted for lumber used to manufacture a baseball bat that could be used to kill someone, be abolished? I think that this clause creates many problems. Find a clause that will create fewer problems. Guidelines already exist.
I cannot find solutions to something that I do not see as a problem.
Ms. Des Roches: The major problem that needed to be solved was transparency, the opportunities that existed for fraud. It is important, as concerns taxpayers' money, to ensure that there is no fraud or tricks used to spend this money unwisely. As concerns morals, this is much more subjective and, in addition, it is after the fact. We are here to tell you that this bill has made clarifications that were necessary regarding transparency, the governance of a fund and the assurance that this money will not be used for fraudulent purposes. Congratulations! The clarifications brought in this regard are wonderful. I think that they were required, but the stipulations concerning morals are not necessary.
[English]
Senator Tkachuk: Let me guess what I think the film industry wants. When you take away all this stuff we have been talking about, what you want is clarity. When you get your tax credit, you want to know that that tax credit will be good while you finish your film, because the tax credit gives you access to the bank. You want the bank to have confidence that the tax credit will be there at the end of the road or else there will be problems. That is what you want. What you do not want is someone to say after the fact that you cannot do that.
Mr. Legault: That is part of it.
Senator Tkachuk: That is one part of it. What is the other part?
[Translation]
Mr. Legault: It is the artist's freedom to express himself or herself freely on a subject, with no strings attached to any kind of funding that constitutes the stumbling-block. That is the subjective criterion. There are two aspects: the artistic aspect and the aspect from the viewpoint of the president of the Union des artistes, who understands clearly that this way of doing things could potentially have a major impact.
[English]
Senator Tkachuk: You know well that if you fill out a form saying you will be making a pornographic film, you will not get a tax credit, because that is the guideline. You will not get a tax credit if it will be advertising or gala advertising. You know what the guidelines are. We are trying to establish the guidelines so that everyone knows. It is not that complicated.
Presently, there are proposed guidelines and there are guidelines that they kind of operate under, whether you know it or not, or whether you like it or not, because you know what these guidelines are. If one of the guidelines becomes law, how will that make a difference? How will that be different from what you are operating with presently? That is why we never had any problem, because you were already operating under those guidelines. Whether it is said or unsaid, that is the way you are operating.
[Translation]
Ms. Des Roches: With guidelines, it is easier to work within the spirit; with the law, we must follow the letter. Sometimes, people can get bogged down in the details with the law. The law has consequences. Guidelines act as a guide, but they do provide a certain leeway or flexibility. There is almost no flexibility when one goes against the law. The moment a law becomes more prescriptive, this paves the way to greater subjectivity.
The Chair: In the bill, there is a provision stipulating that the minister must publish or distribute the guidelines, which are to be established following consultation with unknown persons. That is the problem; it is not clear and there is a great deal that is left to discretion. I know you do not like these words because even guidelines are not really regulations; they are left completely to the minister's discretion, and the film industry does not appreciate that.
Is that really the point? If that was removed, would that go part way to solving the problem?
Mr. Legault: Do you mean within what already exists?
The Chair: No, within the bill —
[English]
For example, they envisage that the minister will issue guidelines. What are these guidelines? That is what all the witnesses say. We do not know what they will be. Not only do we not know what they will be, they can be changed at any time willy-nilly and we do not know when they will be changed. The banks will not know.
[Translation]
Many doubts have been raised, and this greatly undermines our funding and our ability to manage our own affairs.
[English]
That is the worst part of it, it seems to me.
[Translation]
In Quebec, there is legislation stipulating that no tax credits shall be granted to films or audio-visual productions that are against public policy. Period. Would the absence of discretionary guidelines give you more artistic freedom?
Mr. Legault: Was that the original proposal, public policy?
The Chair: That is the currently the law in Quebec and we have no problem with that.
Ms. Des Roches: I do not remember any law on public policy in Quebec.
The Chair: It is public policy.
Ms. Des Roches: That is always the way public policy has been perceived. It complies with the spirit of the tool or with the regulations of the supporting tool.
[English]
The Chair: Could it be a solution? I am the chair here. I am hearing all of this stuff. It seems very clear that the problem with Bill C-10 for the film industry is that it creates doubt; there is no clarity. We are convinced of that. I sense it from all my colleagues. We want to help fix it so that there will be clarity and the banks will say: Do not worry; it is clear, if you people follow the normal rules.
If we took out all this business about the discretionary guidelines — because there are quite a good things in the bill for your industry; you know that — if we took out that doubtful part and leave wording such as they have in Quebec, would that work for you?
[Translation]
Mr. Legault: I would like to see those words again.
Ms. Des Roches: If it was a question of public policy — But there again, I do not think that this needs to be set out in the act. When there are requirements in the regulations, for example, not to submit applications that would run counter to public policy, et cetera, we can read the form; it does not have to be enshrined in the act.
This is only logical.
The Chair: If it is set out in the act, at least it is clear. However, as Senator Fox has just shown us, the formula can be changed in a discretionary manner as the person responsible sees fit. So that is more of a problem.
Mr. Legault: The difference between Canada and Quebec with regard to tax credits is that SODEC administers both grants and tax credits. This means that the same agency applies the same rules. However, in Canada, it is not the same thing. Telefilm Canada and CAVCO are two different entities. It is as if Telefilm Canada told Revenue Canada, ``Yes, it is alright, you can issue tax credits because that meets our criteria.'' If it is for future projects, SODEC guidelines apply for the issuing of tax credits. If, for SODEC, the words ``public policy'' or ``public interest'' are specified — which I am not certain of —
Senator Fox: The words are ``government policy.''
Mr. Legault: Government policy seldom deals with morals, except in the case of pornography, for example, because it is stated that movies will not be used. In general, what matters is Quebec content, the criteria — which are much more down to earth — the number of years of experience and who is part of the film project.
In Canada, that is how tax credits are obtained, and this is much more the responsibility of CAVCO than of Telefilm Canada. The criteria are different. Could the criteria be the same? I think that they could be the same for Telefilm Canada and for CAVCO.
Senator Goldstein: Have you had problems to date with the Quebec government, given the wording of this provision?
Mr. Legault: Not to my knowledge.
Ms. Des Roches: If it truly complies with government policy, then that reflects our interpretation of ``public policy.'' In this context, it is clear that all cultural policies and support tools for culture and cinema must be respected. Yes indeed, that is the spirit. As soon as we start talking about morality or things that are much more subjective in our society, we will end up painting ourselves into a corner. When we talk about policies to provide support, that is fine. As concerns the Broadcasting Act, that is all very well, but as concerns morality, we would be opening a can of worms.
[English]
Senator Moore: Mr. Chair, you touched on something with respect to the guidelines and so did Senator Tkachuk, with respect to knowing what the guidelines are and the importance of that.
This bill contains a provision that says the minister may change those guidelines. First, the guidelines are not statutory instruments and are not reviewable by Parliament, the Commons or the Senate, by our Joint Committee on Scrutiny of Regulations, which means they can be changed, added to or deleted without your knowledge. How do you feel about that?
[Translation]
Mr. Legault: We are talking about funding and I am trying to understand the ramifications. Could the law stipulate that the minister may change the guidelines? As far as I know, she already does so right now; if she wants to do so, she can. I have the impression that we are confusing two things. We are talking about funding and about tax credits. We are talking about what the minister wants to do within her own department. To me, it seems as if Bill C-10 is being used to solve a completely different problem. The minister may have problems with the money that she grants in general, whether it be for theatre subsidies or others. She may award a grant to a project even if she does not agree with it.
I am under the impression that we are trying to solve two problems at once, that is, by trying to find another way of doing what the minister cannot do within her own department. I am not saying that the minister should not have guidelines. If people are not happy, all they have to do is not re-elect that party or they can also criticize the minister. That is one thing. However, I do not think that this is the place for this provision. I am not saying that this will solve all the problems or that it will protect the entire movie-making industry from a guideline that the minister could issue. I am just saying that I do not think that it should be included in this particular bill.
[English]
The Chair: Honourable senators, are we pretty well covered? This has been very helpful and puts a new perspective.
[Translation]
I would like to thank you very sincerely on behalf of all senators.
[English]
We will adjourn the formal part of the meeting.
The steering committee has met and we have some budgets to adopt. We are near the end of a session. Since the new fiscal year began we have never put our budgets in place. We have an ongoing general mandate for our general surveillance of the financial services sector. We have a legislation budget for specific bills such as this one. We have to renew our budget for the study on interprovincial barriers to trade. We have finished all of our hearings and have the beginnings of a draft report that we will focus on once we have completed study of this bill.
The steering committee has met and has come up with these three draft budgets. If you are comfortable, I would accept one motion for the three. If you would like details, I am quite happy to explain.
Senator Ringuette: I have a question for clarification on the legislation budget. Under ``All Other Expenditures,'' I see books and periodicals for $6,000. What is that?
The Chair: That is a good question. Every morning we get all the newest developments in the financial sector. Some of us use it, others do not, but nearly all of our staff do. It is very helpful, and that is what it costs.
Senator Ringuette: Okay.
The Chair: On the issue of the general mandate, we are contemplating going to Europe. We already have a budget in place for going to Washington.
The first motion is:
That the draft budget concerning Legislation in the amount of $36,000 be adopted and that the Chair present the same to the Standing Committee on Internal Economy, Budgets and Administration.
Senator Moore: I so move.
The Chair: Is that agreed?
Hon. Senators: Agreed.
The Chair: The second motion is:
That the draft budget concerning issues dealing with interprovincial barriers to trade in Canada in the amount of $6,700 be adopted and that the Chair present the same to the Standing Committee on Internal Economy, Budgets and Administration.
Senator Moore: I so move.
The Chair: Is that agreed?
Hon. Senators: Agreed.
The Chair: The last motion is:
That the draft budget concerning the present state of the domestic and international financial system in the amount of $223,600 be adopted and that the Chair present the same to the Standing Committee on Internal Economy, Budgets and Administration.
Senator Moore: I so move.
The Chair: Is that agreed?
Hon. Senators: Agreed.
The Chair: Thank you.
For Senator Jaffer and for Senator Ringuette, we have been so focused on this bill since November that we have not been focusing on huge problems in the economy worldwide, issues such as credit and the like. We have to get back to focusing on that.
I think you will be pleased. The steering committee has a plan as to how we can put this bill to bed. We will do some work as soon as we adjourn. We will focus on it and keep you up to date.
Senator Goldstein: Hopefully at the beginning of September we will be able to finish our study of Bill S-205.
The Chair: Yes.
Senator Jaffer: What would be useful for me, not that you have to follow it to a T, is a rough idea of what the work entails and how we plan to cover it. For example, roughly when are you planning the trip, and so on, so that we have an idea? With respect to other committees, we would then be aware that this trip is happening so that we can plan.
The Chair: We have not focused in on a date yet, but it is a very reasonable question. I would undertake, after consulting with my colleagues on the steering committee, to issue a letter to everyone at the end of June outlining our prospects.
Senator Tkachuk: I talked to a reporter today who had phoned me about Bill C-10. He had already talked to a number of Liberal senators on this committee but had not —
The Chair: Is this person Simon something or other?
Senator Tkachuk: Yes.
The Chair: I refuse to talk to him.
Senator Tkachuk: Yes. He had not told me the names of the senators, of course. It was quite a civil conversation. We talked about some of the problems we had. I took a couple of shots at the Grits because they had taken a couple shots at us, but it was nothing mean-spirited, of course. However, there was one thing he said that kind of disturbed me, and I just wanted to clarify. He mentioned the amendments. I said that we have been pushing the Liberals on bringing amendments forward. I have my views about why they are not there, et cetera. He said he talked to a Liberal senator. I think it might have been you, Senator Goldstein. I think he did mention that, but it may not have been because he sort of moved from place to place. He said the Liberals are going to table the amendments publicly before they bring them to the committee, that they are just going to do it this spring.
I said I thought that would be rather strange considering that we have been having good discussions amongst all of us about finding a common way to solve the problem. If they are going to take it to the public field before we even have a look at it, I said that will ruin a lot of the good feelings that we have developed about trying to solve this problem.
I am going to be frank and ask you straight out. If you are going to have amendments, I certainly would — if we had some ideas, Mr. Chair, I think we would bring them to the committee. I would not be having a press conference saying here is what we have decided.
The Chair: We have a project underway. What the steering committee is working on now, and I think members are unanimous, is that we should try to come up with joint amendments so that it is not ``we'' and ``they.''
Senator Tkachuk: That would be perfect.
The Chair: That has been the tradition of this committee for many years. If we can do it, then the amendments will be proposed, unanimously adopted and the bill will be reported.
Senator Tkachuk: That would be perfect.
The Chair: There seems to be general agreement that this bill is a sick puppy and needs a lot of medicine.
Senator Tkachuk: It needs a little work.
The Chair: We cannot cure it entirely.
Senator Fox: Are we on broadcast?
The Chair: No, we are not on broadcast. We are on the record.
Line Gravel, Clerk of the Committee: Yes, we are on broadcast.
The Chair: I asked to turn it off. I am sorry.
Ms. Gravel: We are not on TV, but we are on broadcast.
Senator Goldstein: We have had that fun before.
Senator Tkachuk: There you go again. Those dog-gone mikes.
Senator Goldstein: I did not say a word.
The Chair: I do not see any problem there.
Senator Moore: Are we adjourned?
The Chair: Are you moving that we adjourn?
Are we clear? Is everyone clear?
Senator Tkachuk: I think that is a great idea.
Senator Goldstein: In the steering committee yesterday I said to Senator Angus that I would like to see what you have in mind by way of amendment. What we have heard from the industry has been pretty unanimous. They have been talking about the Criminal Code as being the —
Senator Tkachuk: Are we adjourned now?
Senator Goldstein: No, no, we are still on — or off? I do not really care. I do not speak differently depending on whether we are on or off.
I think that it is important for the industry to have a chance to take a look at whether or not that is an appropriate way to solve the problem.
There is, of course, also the problem of pornography. Pornography is also covered by the regulations, and you cannot produce pornography. I am troubled by something totally different. My personal trouble is excessive violence, and no one in the industry has talked about that issue.
Senator Tkachuk: Gratuitous violence.
Senator Goldstein: Yes, something that has no point to it.
I think we have to have the industry openly talk to us about these issues and problems. I know, for instance, that Senator Dallaire's movie could not have been made if simple violence were to be the criterion, so clearly it cannot be the criterion. There has to be something more. What more? I do not know. Tell me what more you have in mind. I am open to suggestions.
The Chair: We have to find a clarity.
Senator Goldstein: We have to find some way.
The Chair: Then we move on.
Senator Goldstein: We also have the other tax stuff to deal with, and we have a plan to do that, Senator Tkachuk. I do not know if you are privy to it. I will tell you about it later, if you want.
Senator Tkachuk: You know what; that is why people are in charge in the steering committee, and I trust them to represent my views.
The Chair: The meeting is adjourned.
The committee adjourned.