Canadian Heritage Committee on March 9th, 2015

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

We'll get back to you in a second.

Mr. Petrollini, do you have any ideas beyond tax credits that you would suggest the federal government undertake regarding policy?

[Lui Petrollini]

I'll echo Mr. Dhaliwal's comments. It's around producer control. My world isn't in tax credits, obviously, and isn't in tax incentives, but the producer control guidelines give us the opportunity to play with such guidelines without impacting the tax credits or without offering more tax credits.

Again, on the topic of treaty co-production—and this speaks to producer control again—if we relax the ability of or the need for producers to only engage individuals who are resident in the co-producing countries, then ultimately that will speak to commercial viability of films and potentially enhance the viability of our Canadian films.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thanks.

I have two minutes left. We'll have quick questioning. If we could go around one more time, could you tell me whether or not you think grind is actually a problem that we have to deal with?

[Ken Dhaliwal]

We're talking about the grind on the credit?

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Yes.

[Ken Dhaliwal]

It's a problem for producers, because they're the ones who are losing out. I think the question is—if I were to take the other side of the equation and say as Lui said—is it consistent with industries across the board? If you're looking at applying a sort of policy to this industry that matches with others, then I would say that it's probably not an issue.

[J. Joly]

Sure. There are obviously a lot of voices around. I can absolutely say there's a problem with it when you look out through that lens. Specifically, when it comes to geographical production, I think some people get more food on their plate than others, potentially. Like I said, I like to look at other ways to bring other revenue into the system as well. I know that some things are not necessarily going to be there forever. I always try to play the long game.

[Lui Petrollini]

I think my answer could make me somewhat unpopular, but I would have to say that you really have to understand what the implications are of relaxing the grind. The implications are in the numbers themselves. Ultimately, on a basic production, it's going to result in about $8 more, on a Canadian content production, in the hands of the producer. Based on what the federal government is currently paying, it's about 50% more than what you'd be actually giving up now in the form of tax credits. You have to be cognizant of what the costs are if you're willing to do that.

My concern would be more around the consistency of the federal government and how it deals with other programs or similar programs that are available to other industries.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

That's very responsible of you. Thank you.

I have a minute left. I asked other witnesses whether or not our federal tax credit is high enough. Perhaps in this one minute you could answer whether or not you think it's high enough.

[Ken Dhaliwal]

I think it's probably high enough, but it takes too long to get.

[J. Joly]

I would echo that sentiment. I would say that if you can accelerate anything and create urgency around it, that creates a better pipeline and more business.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you.

Mr. Petrollini...?

[Lui Petrollini]

I agree that it's high enough and I agree as well about acceleration.

The only thought I have about accelerating is to perhaps help producers by interim financing some of the tax credits—paying a portion in advance of the actual claims.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Okay. Thank you very much.

[The Chair, Conservative, Gord Brown]

Thank you.

Mr. Dion, you have seven minutes.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Thank you, Mr. Chair.

Thank you very much, the three of you, for being with us.

On this issue of there being a long wait for the money, Mr. Shawn Williamson from the Motion Picture Production Industry Association of British Columbia said the same. I will quote:The suggestion was that there may be a way for government to front that money and allow [the production industry]...to save the banking on that.

You are starting to come up with ideas you may have to speed up the process, so that the producer does not have to spend so much money on the loans and have the tax credit at the front.

Can the three of you develop that new idea, please?

[Ken Dhaliwal]

Other jurisdictions have adopted various methods. Some jurisdictions don't wait for an audit. Part of the timing here is that you need an audit, and that audit has to be completed after all the expenses are made.

I'm not necessarily supporting that there be no audit, but perhaps a portion of the money could be paid the way a bank would pay: a small amount is paid up front and the balance upon audit. The risk, obviously, is that you're paying before you know what has actually been spent.

[J. Joly]

Thank you, Mr. Dion.

My French is a bit rusty because I don't often have an opportunity to use it in Vancouver, but I will try.

I'm not a traditional producer. I am a CEO of a company and I work with producers.

I think that this problem doesn't affect Canada alone; it's a global phenomenon. Advancing money is a very good idea. But other things are more beneficial for my company. The North American film industry is not a growth industry. That's mainly because of the money spent on printing and advertising.

My platform was developed based on the movie Moneyball, whose principles I apply to printing and advertising. Each dollar I invest in the system equals $1,000 in user or public funding.

The federal government could perhaps help us with those marketing activities. That could help me a lot.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

You would like to have some help with marketing.

[J. Joly]

Yes.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

What can the federal government do in terms of marketing?

[J. Joly]

Some distributors are currently recognized by Telefilm Canada. They are different from me because I am a non-traditional film distributor. I am the distributor, and I operate like a studio. Therefore, I cover all the expenses related to printing and advertising. Other distributors can spend money, but since they are recognized by Telefilm, they recoup their expenses.

Being able to receive this kind of funding would help my company. At the time of deployment, that money would be used to cover printing and advertising expenses. It may be an incentive, especially in Canada, to be able to recover a little of the money spent on marketing, as some companies do.

I don't want to seem like the voice that's going against all the others, but for me, making the movie is one thing, but unless you can market it, that's the real challenge. For me the focus has always been, how do we get

more money for our innovative printing and advertising activities.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Merci beaucoup.

Mr. Petrollini, would you like to add something about the way we may speed up the federal help and the possibility of having the tax credit up front in order not to have to pay so many loans before enjoying it?

[Lui Petrollini]

That's a difficult one because ultimately the tax credit moneys are always the last moneys in the door, and that has to do with the fact that they're triggered by the filing of a corporate income tax return and the various tax credit claim forms.

There are risks associated with interim financing, the tax credits, or paying them up front. Some of the risks would involve or include whether or not a company or a production actually meets the CAVCO Canadian certification criteria at the end of the day. It's one thing to go forward with a production budget and a plan of who your key creative individuals are going to be, and meeting those points and making sure you meet the expenditure limits required under CAVCO guidelines. At the end of the day, however, you could be in a situation where, if you haven't had production accountants or producers who have been watching those costs closely, you do not meet those expenditure criteria. I've been in those situations.

You don't want to have a situation where the federal government is supplying a tax credit up front with those risks occurring, unless they're mitigated. There would have to be a clear process in place to eliminate or mitigate those risks to the greatest extent possible, so that you're not faced with having money out there that should not have gone to those producers in the first place.

Do I think it's a good opportunity to help producers? Absolutely.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Thank you very much, the three of you.