Canada producers question tax change

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TORONTO -- Canada's film and TV censorship flap saw its focus shift southward Wednesday as questions were raised over why U.S. producers will be exempt from proposed tax credit rules.

As part of new tax changes contained in Bill C-10, the federal government proposes that Canadian producers applying for an indigenous tax credit could see their projects vetted by a committee that would judge whether they are excessively sexual, violent or hateful.

But the Writers Guild of Canada on Wednesday questioned why U.S. productions that shoot in Canada and receive the production services tax credit for foreign producers would be able to avoid government scrutiny.

"A certified Canadian production found in contravention of the guidelines will be denied eligibility while an American company, making the exact same film in Canada, will get a production services tax credit," said Maureen Parker, executive director of the Writers Guild of Canada.

Parker insisted she was not targeting Hollywood studios with her comments, but only underlining how the proposed legislation was ill-conceived.

Bill C-10, which is set to receive its final and third reading in the Canadian Senate before it passes into law, will allow the federal government to withhold tax credits and other lucrative public subsidies from domestic film and TV productions that are deemed offensive.

The WGC's intervention was prompted by a statement Tuesday from federal Heritage minister Josee Verner, who argued that Bill C-10 was not about censorship, but rather closing a "loophole" that enables films and TV shows produced in Canada to be prosecuted for offensive content while simultaneously tapping a tax credit to offset labor costs.

Canadian producers that receive an indigenous tax credit can offset 25% of their labor costs, while foreign producers that tap the production services tax credit can offset 16% of labor costs. While the percentage is smaller, the dollar figure is generally much higher due to the larger budgets involved with U.S. productions.

The role of Hollywood productions in Canada is expected to be raised in the Canadian Parliament on Wednesday afternoon when the opposition Bloc Quebecois puts forward a motion to amend Bill C-10 because it "opens the door to unacceptable government censorship of film and video production."

David Zitzerman, an entertainment lawyer with Goodmans LLP, agreed there is an anomaly in Bill C-10 that gives Hollywood productions a free pass when it comes to sexual and violent content. But he added it would be wrong for the federal government's tax amendment to be extended to the production services tax credit for foreign producers.

"This is not about Americans versus Canadians, and Hollywood studios versus independent filmmakers. It's about bad tax policy in Canada that needs to be addressed," Zitzerman said. "It's a red herring to focus on the Americans. We welcome foreign production."
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