French tax breaks under threat, Quantic Dream threatens to relocate

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.