EU investigates French tax breaks

The French videogame industry is to come under scrutiny from the European Union, as is investigates whether proposed tax breaks from the government are illegal.

The proposal would offer tax credits of up to 20 per cent of the cost of producing a videogame so long as it meets certain criteria such as being an adaptation of existing original European work, or that it passes a government test looking at the games' originality, quality and promotion of European cultural diversity.

The French government claims the proposed scheme promotes cultural projects, but the European Commission will investigate whether it distorts competition rules, where governments are free to promote culture so long as it does not give unfair advantage amongst member states.

"We must be sure that the measure will promote only genuine cultural projects and that it will not have the effect of an industrial policy instrument in favour of the videogames sector," said Neelie Kroes, competition commissioner for the EU, speaking to the news agency AFP.

France is one of the few European regions, along with Nordic states, to offer tax breaks and other government incentives to developers and publishers.

The developer trade group Association des Producteurs d'Oeuvres Multimedia has been heavily involved in the scheme, which was set up in 2003 to help maintain and develop the videogame community in France, and also includes educational and training initiatives.

An initial probe by the EU had raised doubts as to whether the tax scheme had broken rules, with the commission stating the criteria, "may give rise to a potentially broad interpretation and it is not clear that they make it possible to select only videogames with a cultural content."