A new bill that would give the federal Heritage Department the power to deny funding for films and TV shows it considers offensive is creating shock waves in the industry.

Changes now before the Senate to the Income Tax Act that would allow the federal government to cancel tax credits for projects thought to be offensive or not in the public interest. The amendments have already been passed in the House of Commons.

The amendment to Bill C-10 would allow the Heritage Minister to deny tax credits for Canadian productions, even if federal agencies such as Telefilm and the Canadian Television Fund have invested in the production.

Representatives from the Heritage and Justice departments would determine which productions are unsuitable and therefore ineligible for tax cuts.

'It sounds like something they do in Beijing.'— Director David Cronenberg

David Cronenberg, the Canadian director behind the critically acclaimed Eastern Promises, said the proposed plan doesn't belong in Canada.

"It sounds like something they do in Beijing," he told CBC News.

"You have a panel of people working behind closed doors who are not monitored and they form their own layer of censorship."

Cronenberg says Canadians have a reputation for making edgy dark movies that go places other filmmakers wouldn't venture.

This new panel could quash that kind of creativity, he said.

Producer Steven Hoban is concerned that the provision will stop money from flowing into the Canadian film industry.

Filmmakers depend on the tax credit to help secure additional funding, said Hoban, who produced the film Young People F**ing, which is scheduled for commercial release in April.

"I think a movie like Young People F**ing would not have been made if Bill C-10 had been in effect when we were going for financing the film," he said.

"Just the optics you get with that kind of title, I think we wouldn't have gotten the tax credit and, again, if we didn't have that tax credit, it wouldn't have been possible to make that film here in Canada."

Plan amounts to morality policing, actors say

The organization that represents Canadian actors said the changes have grave implications for artists and are morally offensive to modern Canadian society.

Stephen Waddell, national executive director of the Alliance of Canadian Cinema, Television and Radio Artists, the actors union, said it seems the government wants to set up a form of "morality police."

'It's our responsibility to ensure that public funds are not invested in certain types of material, such as hate propaganda, excessively violent material, or pornography'—Annette Gibbons, Heritage Canada

"The government is overstepping its bounds and interfering in an arms-length process," Waddell said in a statement released Thursday. "Withholding public funding for film and television productions it deems offensive is a dangerous direction for this government that smacks of censorship."

Waddell said he wonders whether the standards to be applied would be representative of a modern Canadian society or what he calls a "fundamentalist perspective" borrowed from the United States.

Annette Gibbons, associate director general at Heritage Canada, said the changes are only slight alterations to current guidelines.

"It's our responsibility to ensure that public funds are not invested in certain types of material, such as hate propaganda, excessively violent material, or pornography," she said.

Bill Siksay, heritage critic for the NDP, said he did not know about this amendment when he voted for the 600-page bill. 

"To hear now that there may be a clause in it that will allow the government to censor the creative process in Canada comes as a significant shock and surprise," he told CBC News.

With files from the Canadian Press