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French tax breaks under threat, Quantic Dream threatens to relocate

Wed 08 Feb 2012 2:45pm GMT / 9:45am EST / 6:45am PST
PoliticsDevelopment

UPDATE: Guillaume de Fondaumiere confirms "sad but unavoidable" relocation of parts of Quantic Dream

Update: Quantic Dream's Guillaume de Fondaumiere has confirmed to GamesIndustry.biz that the company would be left with "no choice but relocate certain parts of our business" should the EU deny France an extension on tax relief.

"The French games tax break has had a very positive impact on our studio," he said in an e-mail. It has in particular enabled us to offer competitive salaries to compete with top studios (located in particular in Montreal), and attract French and international talents on a worldwide scale, while keeping production costs at reasonable levels."

The tax break has also proved beneficial for France as an entire country: de Fondaumiere cites a recent study that estimated a return of €1.70 in taxes and social changes for every €1 invested by the state, along with the creation of hundreds of jobs.

"As Montreal authorities always point out, only the high return on investment of their 37.5 per cent tax break explains why they keep it going since almost 15 years now. The French authorities do understand this and both the Ministries of Culture and Industry absolutely want to keep the measure alive, and even extend it."

"A great number of countries are wooing Quantic Dream on a regular basis, and if we can't benefit from this tax break anymore in France, we would have no choice but relocate certain parts of our business to such a country. This would be very, very sad, but unfortunately unavoidable."

Original Story: Game companies in France face losing tax breaks worth up to 20 per cent of their production costs, Develop reports.

January 2012 marked the culmination of a 5 year period during which French game developers were allowed exemption from EU laws against state aid.

The tax relief measure offered refunds as high as 20 per cent on production costs, but if the exemption is not extended France and other EU countries would be prohibited from offering tax breaks regardless of policy at the state level.

Discussions between French officials and Wouter Pieke, the European Commission directorate general for competition, are said to have deteriorated.

In addition to the longstanding concern over giving individual EU member states specific advantages, the French government is also reticent to use taxpayer money for this kind of relief in a tough economic climate and with a general election looming.

Develop claims that Guillaume de Fondaumiere, joint CEO of Quantic Dream and chairman of the European Games Developer Federation, has warned the European Commission that his company would be forced to look towards Canada if the measures were not reinstated.

"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," he is quoted as saying.

de Fondaumiere used the loss of so much British talent to Canada as a cautionary example of what could happen to the French industry without tax incentives.

A recent TIGA survey suggested that as much as 40 per cent of the jobs lost in the UK games industry relocated to countries with strong tax incentives, with the national industry shrinking by 10 per cent overall.

"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 acquired by Develop.

"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."

GamesIndustry.biz has approached Guillaume de Fondaumiere for clarification on his alleged comments, and Quantic Dream's position on relocating to Canada if French tax breaks are not reinstated.

12 Comments

I think, its too easy to say - oh no, there is no more tax break. relocate.
That is not a long term solution.

Because invariably, Montreal will not have its tax break indefinitely. Look at the diminishing impact in Vancouver.

Posted:2 years ago

#1

Bruce Everiss Marketing Consultant

1,692 594 0.4
If all the world did this then taxpayers money wouldn't be wasted and games would be made where it made the most sense.
If all the UK talent that is currently subsidised abroad came back to the UK to work it would be amazing.

Posted:2 years ago

#2

gi biz ;,pgc.eu

341 51 0.1
Taxes in France are already unreasonably high, imo. On top of what the employer pays to the government, employees pay an extra amount taken from their net income, so I'd say the government is already taking enough money. Personally, after throwing all the taxes in, my salary was 36% less than the gross. Of course you then need to take into account the inflated rent prices, the ever growing public transport fares... but that applies to most Countries. Putting the bar even higher for game programmers (that are already less paid if compared to their .net/java colleagues) doesn't sound too smart to me.

Posted:2 years ago

#3
Hard to say though, its up to the paymasters and cartel in brussels to duke it out (maybe a game of TF2 would be a way to resolve current and future EU policy)

:)

Posted:2 years ago

#4

Bruce Everiss Marketing Consultant

1,692 594 0.4
@Andreas

Interesting, we are headed that way.
One step could be for relatively small teams in the traditional development countries to do all the pre production and project management. Then for large teams in Asia to do all the slog. Finally it comes back to a small team to do the polishing, balancing etc. This tactic would make the most of the relative strengths and is the way many companies have been going for some time.

Posted:2 years ago

#5

Fran Mulhern , Recruit3D

863 707 0.8
Touching on Andreas' and Bruce's comment...

I raised a similar issue a few years back in an issue of Develop, only to get called patronising and racist. My point - and it's still valid - is that outsourcing art to Asia doesn't work for the UK in the long term. Firstly, we're helping train up a generation of artists there on work that otherwise our own junior artists would have cut their teeth on. And, secondly, as Andreas has mentioned, it's wrong to assume that the model of the east essentially doing our donkey work can survive forever. I've heard people say that "Oh, it's okay, Asians aren't very creative, they won't actually MAKE games themselves". And that's ******s. Eventually, that part of the world will get sick of doing our crap and start making games themselves. When that happens, we'll be stuck with a massive artist shortage because, in the intervening years, we've neglected our own artists.

The obvious solution would be for nowhere in the world to have tax breaks, but in any event I agree with Andreas - the industry will end up in south east Asia because the cost base is so much lower. Until we lower our cost of living, and our tax burden, that will remain the case. Our governments have taxed our populations out of jobs - it's that simple.

And no, the Quebec tax breaks won't last forever. All that's happening right now is the Quebec tax payer is funding the creation of IP and profits for foreign corporations, and funding condos for young yuppy games developers. Some of you - especially those of you in Canada - will find that idea insulting. But just because it makes for uncomfortable reading doesn't mean it's not true. And you can say it's not true, it's creating a skills base. But when the publisher find the cost of doing business elsewhere to be cheaper, they'll move there and that skills base will have little or funding. When the gravy train ends, corporations will move on. Don't for a second thing any of the big multinationals have some kind of innate connection with Quebec that means they'll forever be there. Business is business.

Edited 1 times. Last edit by Fran Mulhern on 9th February 2012 11:31am

Posted:2 years ago

#6


I found the Arsenal appraoch to home grown talent can have very rich rewards.

Talking from the Training of Artists (side)

Unfortunately it is also a gamble at takes at least 6 months minimum to untrain, re train and get artist into the idea of production art for games (rather than just pretty pictures). With more local events, local training/game workshop events, maybe there will opportunity for some solid UK grown talent.

I forsee the next 3 years having all the multiple startups either surviving and coming into fruition or not making the cut. For those that have survived, the expansion and growth will be on solid footing and hopefully they carry a large tranche of talent on board.

Interestingly enough, we are receiving lots of foreign based animators applying for jobs in UK, from spain, italy, france. These can result in very good concept artist if they make a the transition well

Posted:2 years ago

#7

Fran Mulhern , Recruit3D

863 707 0.8
"I found the Arsenal appraoch to home grown talent can have very rich rewards. "

To be fair, it's not working THAT well for Arsenal:)

Although, as a Liverpool fan I'm well aware I can't talk:)

Posted:2 years ago

#8
@ Fran - ok, so maybe Football was not such a good analogy (I'm not a football fan) but more in terms of home grown talent and motivation (there are diamonds in the rough in the hills) and one needs a discerning eye to gauge future potential and exploring a whole range of education, seminars and continuing education (for folks working in the industry or seeking to get better) is what i meant

Posted:2 years ago

#9

Fran Mulhern , Recruit3D

863 707 0.8
I get where you're coming from Chee, guess my football humour fell on deaf ears there:)

Posted:2 years ago

#10
My knowledge of football extends to - they earn aloota money (a cool 17 million a year?), and one could do with a few gareth bales to overrun the opposition - for the England squad.

everything else is like medieval tourneys, fought with international galakticos....and a mixture of local/international talent. Thats where the fnatasy football can appeal i reckon.

Maybe we can have fantasy gaming (stick a dream team of game developers on one squad...) per annum. That could be fun.

Posted:2 years ago

#11


That's conceivable the more money you give to the employees the more they spend. When the banker's giant vacuum cleaner sucks our money, through the Revenue, we lose confidence in future, spend less, hence bring the economy to a stall.

Let's abolish taxes and everything will get better. No need to reimburse the virtual debt own to the banksters, with real money.

Posted:2 years ago

#12

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