March 21, 2008

Censorship Charges Fly as Canada Moves to Cut Film Tax Credit

By Joe Schneider,

March 20 (Bloomberg) -- A 13-word clause buried in a 560- page tax amendment is pitting Canada's film industry against Prime Minister Stephen Harper.

The proposal would allow the Canadian government to deny tax breaks to films deemed contrary to ``public policy,'' as determined by the Heritage Department, headed by Josee Verner.

That's censorship, said David Cronenberg, the Toronto-born director of films including ``A History of Violence'' and ``Eastern Promises.'' The new policy would be subject to abuse, derail financing for some projects, and result in fewer films being made in Canada, he and other opponents say.

``It means the minister of heritage will have unprecedented powers,'' Cronenberg said. ``Public policy -- what is that? It's anything she decides it is.''

The change is rooted in the case of Paul Bernardo, a serial rapist, and his wife, Karla Homolka, who were convicted of torturing and killing two Ontario schoolgirls in the early 1990s, said Leonard Farber, who helped write the measure when he was head of the Finance Department's tax-policy branch.

The government wanted the right to deny tax credits to anyone seeking to profit from such offensive subject matter, he said. A movie eventually made about the crimes, ``Karla,'' was filmed in the U.S.

The tax change, under discussion since 1995, was supported by former Liberal Prime Ministers Jean Chretien and Paul Martin, said Farber, a senior adviser in law firm Ogilvy Renault's Ottawa office.

Road to Passage

Now it is backed by Harper, a Conservative. The House of Commons passed the tax amendment in October. It is awaiting debate in the Senate, which can delay or amend bills but rarely kills any legislation. Harper's office declined to comment, directing queries to the Heritage Department.

``This is good legislative housekeeping,'' said Andrew House, Verner's spokesman. It gives the government explicit authority to exclude productions with material that is illegal under the country's criminal code, he said. Some genres, including pornography, already are ineligible.

Under current law, Canadian productions get a tax credit equal to as much as 25 percent of the amount paid in salaries. Foreign productions, which usually have higher budgets, get a 16 percent tax credit. The Canadian Audio-Visual Certification Office administers the program in conjunction with the federal tax agency.

The new law says the minister must be satisfied that ``public financial support of the production would not be contrary to public policy.'' The measure wouldn't apply to films made in Canada by foreigners.

`Gratuitous Material'

The change addresses ``only the most extreme and gratuitous material, not mainstream films such as `Eastern Promises,''' Verner said in a statement March 3.

Many people don't consider ``Eastern Promises'' or most of his other films mainstream, said Cronenberg, the director. It's absurd that a film could receive tax credits if made by foreign producers but not by Canadians, he said.

``Americans can make racist, pornographic films,'' Cronenberg said. ``Those films can be made with Canadian government money, no problem, but the local kind, the Canadian kind, couldn't be.''

One film that may be disqualified by the measure is scheduled for release in Canada on April 18 and soon thereafter in the U.S., said Steven Hoban, one of the film's producers. The movie, a romantic comedy about the relationships of five couples, has a profanity in its title.

Producers won't be able to repay a C$200,000 ($197,000) loan if the government rejects their application for tax credits, Toronto-based Hoban said.

Roadblock to Loans

Uncertainty about public funding will make it difficult for filmmakers to get bank loans, he said. His next feature, the C$26 million ``Splice,'' wouldn't have been made without C$5 million of tax credits, Hoban said. The project also wouldn't have attracted the C$20 million of European funding that's going into Toronto's economy, he said.

Supporters want the current law toughened.

``If a government does not have some power to control tax dollars, I think the taxpayers are going to backlash,'' said Brian Rushfeldt, co-founder of the Canada Family Action Coalition, a group based in Calgary that espouses Judeo- Christian morals.

Allowing bureaucrats to decide what's offensive can be dangerous because the authority may be abused or misinterpreted, said Brenda Cossman, a law professor at the University of Toronto.

``If you look at the history of the low-level officials making those kind of decisions, they often do it pretty badly,'' said Cossman, who specializes in censorship and freedom of expression.

U.S. High Court

A similar issue is before the U.S. Supreme Court, which may decide this month whether to revive a Federal Communications Commission rule that targeted ``fleeting expletives'' on live television. The rule was put in place after entertainers Cher and Nicole Richie uttered a profanity during awards ceremonies in 2002 and 2003.

Cameron Bailey, co-director of the Toronto International Film Festival, said he's concerned that the new law may damp the excitement of Canadian films by suppressing the freedom to push boundaries.

``It kind of is the meat and potatoes of Canadian cinema,''
Bailey said.
``It's what we do. We push the limits.''

Last Updated: March 20, 2008 00:01 EDT

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