Ian Cooper is an associate at Toronto law firm Stohn Hay Cafazzo Dembroski Richmond LLP, which focuses on entertainment, copyright, and technology

Last month, Josée Verner, Canada’s heritage minister, got up in front of this year’s largest gathering of Canadian film and television producers and read from a prepared statement. Among promises of continued support, Ms. Verner offered a challenge to the industry: her government was going to devise new programs that would ‘reward risk-takers.’

Judging from Bill C-10, it appears the kind of risk-taking Ms. Verner and her colleagues have in mind is a lot closer to Russian roulette than an exercise of good business or creative judgment.

The new legislation, which as of this writing is being reviewed by the Senate banking committee, seeks to deny federal tax-credit funding for any production that Ms. Verner’s ministry deems to be ‘contrary to public policy.’ The argument is simple enough: if Canadian producers want government money, they need to play by the government’s rules.

This line of reasoning makes sense if one sees the tax credit as a mere handout. Unfortunately for the Tories, things are more complicated than that.

A combination of industrial and cultural policy, tax credits allow Canadian creators to tell their stories. They also support businesses that generate $4.9 billion in economic activity, and provide an estimated 126,900 jobs.

Nearly all of Canada’s major trading partners have similar incentives in place. (The U.S. and India, both of which have enormous domestic audiences, are the exceptions.) Without public assistance, Canadian producers could not raise enough money to make films and television programs for a country with such a small population. The problem is particularly acute in Ms. Verner’s home province of Quebec, where local films are top draws at the box office but have a harder time finding audiences elsewhere.

The new legislation could penalize projects that already receive public support from Telefilm Canada or the Canadian Television Fund, which is administered by Telefilm. The result is that producers could receive funding from one arm of Canadian Heritage, only to be denied funding from – wait for the punch line – another arm of Canadian Heritage.

Such a state of affairs is a far cry from the vision of government as efficient facilitator of private enterprise promised by Ms. Verner and her Conservative colleagues. As a senior Canadian production executive recently observed in Playback, the government has shown ‘a pretty shocking ignorance regarding how films are financed in Canada.’

To understand how we got here, a bit of history is warranted.

For many years, private investors had a direct incentive to invest in Canadian films through provisions of the Income Tax Act that allowed them to write off the investment against their income. An entire tax-shelter industry emerged.

While many films were produced under the old regime, the government decided too much money was going to promoters, lawyers and other business people who organized the investment structures, and not enough was getting to producers. The idea was to create a more efficient incentive, and in 1995 the tax credit was born.

The system is not without its flaws, but by and large it works. Many other countries (and American states such as New Mexico and Louisiana) have adopted similar rules to support their own creative industries.

There is a catch, however.

The producer must make the film or TV program first, and then claim a refund from the government based on how much money it spent on eligible Canadian labor. The cheque usually arrives about 12 to 18 months after production finishes.

Producers go to banks to finance the tax credits they expect to receive. Banks tend to be conservative lenders, so they require a corporate guarantee from the producer, and sometimes, a personal guarantee. A producer who spends the bank’s money and is subsequently denied the tax credit under the new rules would likely face business or personal bankruptcy.

Faced with a standard as slippery as ‘contrary to public policy,’ Canadian creators will call their lawyers, who will quickly conclude that it is anybody’s guess how the new law will be interpreted. Accordingly, lawyers will advise their clients that the best course of action is to play it safe. Why court personal and professional ruin?

The Tories’ vague public-interest standard is guaranteed to have a chilling effect on artistic expression in this country. It will ensure that fearful producers avoid taking the kinds of creative risks that engage and challenge Canadian audiences.

Put simply, the new law will discourage the very behavior that Ms. Verner claims the Conservatives intend to reward.

What is most disturbing about Bill C-10 is the government’s failure to identify the bogeyman about which it is so concerned. Before legislating, perhaps the Tories might start by citing a single production that currently receives their financial support and fails to meet their standards of public decency.

Of course, to do so would run the risk of finding out that Canadians actually like some of the productions that Ms. Verner’s government finds so odious. Or is it simply that there is no problem – in which case, why the new law?

If the government wishes to have a public discussion about the role of culture in this country, perhaps it should start by consulting the industry and the millions of Canadians that make up its audience.

After all, this isn’t the minority Tory government’s money – it’s the public’s.