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Studio heads speak out against Quebec tax break reduction
Studio heads speak out against Quebec tax break reduction
June 24, 2014 | By Christian Nutt




The next budget for Quebec will cut tax credits to the game industry by 20 percent. This is, unsurprisingly, making studio heads in the region antsy.

The Canadian province's game development business has boomed over the last several years, thanks to its economic favorability. Just last year, for example, Ubisoft announced plans to invest $370 million in the region, creating 500 jobs. But Ubisoft Montreal's Yannis Mallat more recently said that his company is reconsidering its commitment to the region in light of the reduced tax breaks.

Now, more voices are joining Mallat. "You have to understand that there are other [funding] programs in other territories in the world, whether in England, for instance, in Louisiana, or even in Ontario -- which have programs that are more generous than here. And jobs will be created elsewhere," Martin Carrier told reporters in a speech yesterday.

Carrier is not just studio head of Warner Bros. Montreal -- he's also president of Alliance Numerique, a Canadian video game industry lobby group. "Iím not sure we can talk about job cuts per se today. I think looking down the road, we can talk about jobs that may not be created. Itís a little early on and we want to make sure we voice our concern," Carrier said.

Meanwhile, other studio heads are grumbling -- because Ubisoft and Warner Bros. negotiated private deals (that last until at least 2019) last year, while other companies are forced to accept the new rates, Polygon reports.

"I do not know how Ubisoft and Warner will react but it is clear they could take the opportunity to offer more competitive salaries. It makes a big difference, especially in a market like Montreal," David Anfossi, CEO of Eidos Montreal, told French-language newspaper La Presse, as translated by Polygon.

In a press release accompanying the new budget, Quebec's Minister of Finance, Carlos Leitao, said, "Quebec has many targeted tax assistance measures for businesses, particularly large corporations. These measures are costly and can create unfairness. The government wants to gradually change these incentives so that they are general rather than specific in scope."

That suggests a major policy shift -- and that the game-specific subsidies won't be coming back. The cut is part of an effort to reduce spending and balance Quebec's budget; the Ministry is promising that its overall strategy around cutting or eliminating tax subsidies will cut spending by CAD $348 million ($324 million) by 2016.


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Comments


Benjy Davo
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Everybody knew this was going to happen. Tax incentives like this used to only be used to help when forming a new business in order for them to settle in their first few years. Now they are used to hold regions to ransom with the threat that if the incentive is lessened or even removed the big companies will move to another region and start the cycle again.

It almost makes me laugh when newspapers focus on individuals who rely on benefits when so many big companies essentially take large handouts from tax payers money despite already making profits.

Jakub Majewski
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Well, this is exactly why it is folly to rely on tax breaks - both from the perspective of the government, and from the perspective of the companies that benefit from them. If a company is motivated to establish itself in a particular location *only* because of tax breaks, then its presence is never certain.

From the government's perspective, Canada could keep spending money on tax breaks, never reducing them by a cent, only to have companies flee because some other country has come up with a better offer.

And from the company's perspective, a company might invest millions in establishing itself in Montreal, only to find that the disappearance of tax breaks makes their business unviable.


That's not to say tax breaks aren't sometimes a useful thing. Time and again in history, massive tax breaks were offered to individuals to entice them to settle in a newly colonised region, for instance. But in those cases, the assumption was that the tax break would help them settle in, and afterwards these people would provide benefits, which is why the tax breaks were limited in duration from the outset. Permanent tax breaks are simply distortions in the market, and ultimately benefit no one because of their inherent instability.

Kujel Selsuru
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Personally I'm glad to hear this, now maybe we can get some investment in Bristich Columbia :)

Fred Marcoux
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BC had these.... and the GVT removed them... it really hurt the industry there

Wendelin Reich
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If large gaming companies like Ubisoft Montreal actually "need" tax breaks to survive against international competition, that is only because their products are becoming progressively more commoditized. The generic first/third-person shooter/adventure game can now be developed anywhere, and probably is now that UE4 is available for $20/month. No tax breaks will shield you against competition from Asia and Latin America in the long term.

Philippe Allard-Rousse
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First, the original report that Ubisoft and Warner where protected from cuts come from La Presse, not Polygon. Here the original article:
- Ubisoft and Warner protected from cuts: http://bit.ly/1lTliMT (in french, from La Presse)

Second, here some analysis of the situation from a Quebec citizen:

As stated in this article, this 20% tax credit cut apply to all business tax credit, so it's not specifically aim to the video game industry. The cultural industry and Video Game industry are the more vocal against these cuts.

The Minister of Culture and Communications, Helene David , have suggest the cultural troop to state their claim in from of a parliamentary commission for Quebec Tax Reform. A spokesperson of the Ministry of Finance also suggested this commission, which will be held in fall, could change the situation, including restoring the tax credit to its pre-budget level.

Since the cut would not be apply to Warner and Ubisoft, because of previous deal, and that would be unfair, particularly on talent salary, I think there's good chance to see the tax-credit restore to its pre-budget level.

The strategies of the government seem to be to cuts all tax-credit, see what the reaction and adjust based on their claim. For now, I've only hear about the Cultural and Video Game industry.

Ashley Blacquiere
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What an incredibly arrogant thing for Carrier to say: "You have to understand that there are other [funding] programs..." The thing I find so frustrating is the implication that he's willing pull out of Quebec and lose all the accumulated knowledge capital that they've built over the years; it's not like many developers in Montreal are going to want to move to Louisiana, or England, or even Ontario.

Philippe Allard-Rousse
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As I agree with you that it is arrogant, he is talking as the head of the lobby, not from Warner perspective. If the lobby goal is the grown of the industry in Quebec ,he is right that it's a factor that could prevent new business to come.

Carlos Rodriguez
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Well, it's not like many developers want to move to Montreal neither.

Greg Scheel
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If the move their business elsewhere, they will leave behind an army of independent competitors, due to all the talent they will leave behind.

Bart Stewart
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As a former Louisiana native, I can at least point out that a move from Montreal or Quebec to south Louisiana would mean emigrants would still hear French being spoken. :)

Jakub Majewski
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Ashley writes: "it's not like many developers in Montreal are going to want to move to Louisiana, or England, or even Ontario."

I think that needs to be rephrased. Not many developers FROM Montreal are going to want to move elsewhere, that's true. But many developers IN Montreal will be willing to move, simply because they are not from Montreal originally, but from elsewhere, Louisiana, or England, or even Ontario :).


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