My fight with the French tax test

My fight with the French tax test

By Guillaume De Fondaumière

June 30th 2009 at 12:56PM

A look at industry negotiations with the country's Cultural Ministry

The tax relief system for French games has been in place since January 1, 2008. We’ve have seen many game submissions and decisions since, but actually getting this system in place took a lot of negotiating.

In 2006, back when I was the president of the French Videogame Association, I approached the Culture Ministry and asked for tax breaks for game production in France, similar to those that we see in Montreal today.

Immediately, I was told that this was not possible under EU law. I was told that state aid could only be given to products that meet cultural criteria.

I went to Brussels to fight the case and convince EU commissioners that videogames were a form of culture and not just ‘technology’ or ‘software’, but it was not easy. They had a very strong opinion on the matter, and they just didn’t want to listen. The main argument I kept on hearing was that that many games are clearly not cultural.

Maybe some are, they said, but how can something like a football game have cultural significance?

So we proposed a test, for all games, to judge if they were.

I saw it as a foot in the door. We could either take it on and progress with tax relief of some kind, or continue with nothing gained. I was speaking to a lot of developers at the time, and decided to fight for a test that was designed to allow at least 30-40 per cent of French games to be culturally eligible.

When proposing this, the first thing that the French Cultural Ministry told me was “well, in other countries there is a cultural test for films”.

It’s funny they should say that, because there’s never been a cultural test for films in France. Any film with a French producer will get state aid. Warner Bros’ French subsidiary has even received state aid from us.

THE CUT
Since we didn’t have such a test for films in France, the Culture Ministry proposed we look at the German or UK tests for films. Immediately we explained that this may be nice for film, but a copy-paste job for games is not going to help us.

I fought for another year with the Culture Ministry in France, and the EU, to at least integrate a portion of test that would be games related.

For example, we wanted part of the test to review games on their innovation. So today, about 20 per cent of the total possible test points are based on technical innovations. This shift from plain film culture to technology breakthroughs was an important step for us.

Under film rules, a genuinely innovative game would not be recognised as such because it didn’t fit with the criteria of an innovative film. This had to change, and we fought hard so that it did.

We also saw other changes from the film test. For example, movie projects received a certain number of points for having the majority of their crew in the country, but this is even more vital for the French games industry, so we ensured that French teams got a bigger portion of the points for meeting this criteria.

With a culturally British test in the works right now, I would like to say that basing the games tax test on the film one is a mistake.

It is of course the easier option: The Government knows that if the game test is copied and pasted from the film test then the EU will accept it, because they already have done for films. Therefore, this measure may allow things to move quicker and easily, but it is the lazy approach.

They should bear in mind that we don’t have too much trouble convincing the EU Commission that the test we made ourselves is of more value to the games industry.

CALL FOR CHANGE
When I campaigned in Brussels I was, pretty much, doing it on my own. I couldn’t gather more support from fellow European developers, and I even got a letter from the EGDF that said this lack of tax relief wouldn’t be a problem for other developers in the EU.

As the current Chairman of the EGDF, I strongly support Tiga's demands for tax breaks and hope that British developers will be able to convince their government to put a test system in place taking video games' specificities into account.

Now I feel is the time for action. I think the next step should be the European games industry go back to the EU and fight for a cultural criteria test that is more adapted to game design.

Individual European states, such as the UK, are well within their right to enforce EU directives in that country. That’s what the UK can do today; it can take the French games tax credit system, adapt it and implement it.

I feel we can, together, go back to the EU and explain to them that the current EU tax relief system is not enough for us. If we fight for this we will have nothing to lose. The main thing that needs to change is that we have far more technical criteria, that the notion of ‘original’ is better applied to games.

I saw Tiga change, and I saw British developers change, when France got its own tax credit system. Suddenly everyone realised that this wasn’t a fantasy, this was actually possible. If we all work together, so much more can be done.