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Quantic Dream May Relocate To Canada As EU Ban on Game Tax Breaks Hurts Industry

February 8, 2012 Written by Nick Michetti

Video game companies in France may be losing their tax breaks in the near future. Heavy Rain developer Quantic Dream’s co-CEO, Guillaume de Fondaumiere, has allegedly commented that the studio may relocate to Canada if the breaks aren’t reinstated.

GamesIndustry.biz (citing Develop) reports that January 2012 was the end of a five-year period of tax breaks for game development studios in France, which offered refunds as high as 20 percent on production costs. However, if an exemption from European laws against state aid isn’t extended, France and other European countries won’t be able to offer tax breaks at the state level. State aid is generally forbidden in EU law as it could give an unfair advantage to one country over another, but in 2007 game tax breaks were recognized as an exception until 2012. During that exception period, the French government usually offered a twenty per cent refund on production costs of games.

Develop reports that France is facing a “national budgetary crisis” and with a presidential election upcoming for the country, they don’t know whether or not they can set aside money for tax breaks.

Quantic Dream’s de Fondaumiere is also the Chairman of the European Games Developer Federation, and has apparently warned the European Commission that, due to the effectiveness of the measure in France and the hope brought to European studios, abandoning it would be “[a] historic mistake.”

He reportedly said that France doesn’t have an unfair advantage over other European nations due to the tax breaks and that there is no “distortion in competition within the EU” as a result of them.

He cited Ubisoft moving some of their production activities back to France between 2008 and 2011 as something that the publisher had attributed to the tax breaks.

de Fondaumiere also said that if France doesn’t reinstate the tax breaks, the studio may begin looking at Canada, a country which has seen an influx of British game industry talent after the UK government refused to implement tax breaks. Develop also reports that Ubisoft, EA, THQ and Square Enix have invested in “super-sized” studios across Quebec due to a possible 37.5% return on investment provided through tax breaks.

A TIGA study said that possibly as much as 40% of jobs in the video game industry in the UK were relocated to countries that have strong tax incentives.

A European Commission spokesperson gave the following comment to Develop:

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.

If there are any updates on the situation, PSLS will keep you posted.