French benefits blocked unless restrictions lift; UK hopes fade; Quantic Dream considers Canada
France is on the brink of permanently losing its game tax breaks as industry officials urge Brussels to lift a new EU-wide ban on the initiative.
Develop understands that French protocols for game development tax relief expired, as scheduled, in January. The country’s scores of studios can no longer apply for the scheme, which usually offers a twenty per cent refund on production costs.
A reintroduction of the measure in France must be approved by Wouter Pieke, the European Commission Directorate General for Competition, but discussions between Pieke and French officials are thought to have tangled over several issues.
State aid is generally forbidden in EU law, but in 2007 game tax breaks were recognised as an exception until 2012.
Unless the exemption regulation is extended, the UK, France and all other EU states would be prohibited from enacting game tax breaks whether or not their governments approved them.
There is a “genuine concern” that the EU will not reintroduce tax break measures, a source familiar with the matter told Develop.
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It remains unclear which side of the negotiating table is opposed to reinstating the measure. A source close to the matter said the issue “has become more complicated” since talks began.
European Commission officials are deliberating whether such benefits can distort the single market by giving companies in one EU state an unfair advantage over others.
Meanwhile, French officials, currently battling a national budgetary crisis ahead of a presidential election, are contemplating whether it can set taxpayer money aside to fund tax relief measures.
Develop understands that Paris studio Quantic Dream, the acclaimed developer of Heavy Rain, would likely transfer some of its resources to Canada if the block on tax breaks is permanent.
Guillaume de Fondaumiere, the co-CEO of Quantic Dream, has told the European Commission that “the abandonment of this flagship measure, which brings hope to a large number of European studios and which has demonstrated its effectiveness in France, would be an historic mistake”.
de Fondaumiere, also the chairman of the European Games Developer Federation (EGDF), warned that France would suffer from the same ‘brain-drain’ affecting the UK if tax breaks are abandoned.
“We would like to point out that this French measure has not caused any distortion in competition within the EU,” he wrote in a letter to Pieke and seen by Develop.
de Fondaumiere denied that France’s tax break protocols had given the nation an unfair advantage over other EU states, but insisted that they make France more appealing to global publishing firms.
“Ubisoft has relocated some of its production activities back to France between 2008 and 2011 – a step they clearly attributed to the video game tax credit,” he said.
Quantic Dream’s current projects still qualify for state aid. de Fondaumiere told Develop that, if France does not re-enact its tax breaks, he would look at how to utilise similar initiatives in Canada.
A European Commission spokesperson told Develop that “French authorities have said they want to extend the scheme and have now provided detailed information on the effects of the earlier measures”.
“The Commission is analysing the request - no decision has been taken.”
The world-leading tax break initiatives on offer in some Canadian regions have caught the games industry’s attention on a global scale.
Publishing giants Ubisoft, EA, THQ and Square Enix are each investing in super-size studios across Quebec due to the promise of a 37.5 per cent return on investment through tax breaks.
The UK games industry, which has battled for similar aid for several years, is said to be losing vast numbers of talented workers to Canada.
A recent report from trade group Tiga claimed that the UK’s game developer workforce has contracted by about ten per cent since 2008.
It claims that two-fifths of jobs lost between 2009 and 2011 have been relocated overseas.
de Fondaumiere said the UK represents about 40 per cent of games produced in Europe, and warned that the Britain’s continual decline would have a profound negative effect on the rest of Europe.
Ah - the never ending joy of being in the EU!
Such industry-wide tax breaks are just another form of subsidy and should be illegal under WTO rules. (looking at you, Quebec!)
Let them move to Canada and die there, then. If they can't survive without 20% of their production costs refunded then it's not a viable industry. The only games worth the money these past few years were indies anyway.
Politicians do live on another planet or some thing?
This was tried at the WTO and failed to be resolved. This has been allowed to continue far too long in the favour of those countries that are able to exploit this issue. When will the elected people start to do the right thing for workers in an industry that can do so much good for the economy. It has proven again and again how much revenue can be generated if allowed to in such difficult economic times!
It is the politicans that consistantly fail either way to help people and companies to operate in a fair and level environment!
Not the news many would like to hear but I feel it not really a huge blow. Considering that there is no evidence to support ( little that I am aware about ) that tax breaks offer long term growth. I feel the UK has many other issues that fail to attract new developers and talent till fill the jobs
@Gene,
"...and die there...". Yeah, because that appears to be what ends up happening, isn't it?! It doesn't just equate to survivability. That's a simple way of looking at it. If you're business can be given a much better chance to grow AND make money just by re-locating to another country, of course you're going to do it. The Canadian economy strengthens if your games are any good, and in turn you get tax breaks that make it more profitable to operate. There is nothing lost here.
I'm all for this tax break, not because it brings an advantage to French studios but because it decrease the cost of all other taxes they pay and thus even the overall production cost compared to the rest of the world.
If you take any other industry in France, the French taxes make it very unpleasant for foreigner investors to put their money in French companies. This tax break just put the French studios at an equivalent production cost than in UK or US.
Taking this tax break out will definitivelly decrease the number of projects and new studios even on Indies because they'll be affected too.
No evidence? Really? If you were in Montreal right now and could see how many studios are opening and/or expanding here you wouldn't be saying that. Neither would any of the 100+ locals that have got jobs just in the studio I work at. And where are the vast majority of the non-Canadian employees from? Europe.
the problem is that as an EU citizen its getting harder and harder to find a fair paying job because of all these closures and moves.And the few who remain want you for cheap.I had to look for a job last year since i lost mine to cost cuttings and the amounts i had on the table were laughable sometimes. I really like the country i live in but if it goes on like this i will have to move to Canada or Sweden or some place else.
Its so hypocritical of politicians they say that they have to generate jobs and kill with these kind of regulations thousands of jobs. What they have to understand is. Everone wants to make money and everyone wants everything cheaper. So someone has to give.. you cant continue this tax system and then say: all the companies are leaving we have to generate more jobs and and keep others.
"The UK games industry, which has battled for similar aid for several years, is said to be losing vast numbers of talented workers to Canada."
Really - not quite - lets say that companies are not hiring in the UK because they are terrified of investing in staff when faced with "the Canada" question. Staff generally are not leaving, so much as not being HIRED and being FORCED to leave. (Yes...there are people who choose to go certainly)
