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Tax credit cuts threaten future of Montreal video game industry

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The recent announcement of corporate tax credit cuts in the Quebec budget could spell trouble for the local games industry, according to the head of the video game lobby group Alliance Numérique, Martin Carrier.

Finance Minister Carlos Leitão cut tax credits to the Quebec video game industry by 20 percent in his June 4 budget. Carrier, who also serves a vice president of Warner Bros. Games Montreal, said the loss of the tax credits could lead to game development jobs going to Europe, the U.S. or Ontario.

"You have to understand that there are other [funding] programs in other territories of the world, whether it's England, for instance, in Louisiana, or even in Ontario, which have programs that are more generous than here," Carrier said to reporters. "... Jobs will be created elsewhere. We want to keep creating jobs here, adding to the 9,000 jobs already [in Quebec], so it's important to keep supporting companies.

The tax credit cuts will apply to all game studios in the region. However, La Presse reports that major players in the Canadian games industry like Ubisoft and Warner Bros. will be spared until at least 2019 because of agreements the companies signed with previous governments.

"Technically, Ubisoft and Warner will also have their tax credits reduced by 20 percent," La Presse wrote in a report Polygon translated. "In practice, however, the Minister's office confirmed that private agreements from last fall ensure full compensation that can be extended for another five years."

These private agreements could introduce further problems in the Quebec games industry, potentially giving Ubisoft and Warner Bros. the capital to offer more competitive salaries.

The CEO of Eidos Montreal, David Anfossi, and head of BioWare Montreal, Yanick Roy, both expressed concerned over the inequality the agreements create.

"I do not know how Ubisoft and Warner will react but it is clear they could take the opportunity to offer more competitive salaries," Anfossi said. "It makes a big difference, especially in a market like Montreal."

Government tax credits have fueled growth of the games industry in Quebec, attracting studios that are keen to capitalize on its tax breaks. Studios in the region include Ubisoft Montreal, Warner Bros. Games Montreal, BioWare Montreal, EA Montreal, Funcom, Gameloft and more.

Minister Leitão's said in a media release that the tax credits are being reduced because they are "costly and can create unfairness."

"The government wants to gradually change these incentives so that they are general rather than specific in scope," he said. "These measures of general scope will be simpler to apply, thus maximizing their benefits and limiting the administrative burden on businesses."

The tax credit reductions and other measures are expected to cut government spending by $CAD348 million by 2015-2016.

Carrier told the press he will press his case before a parliamentary commission in Quebec City later this year.