Visual effects and animation companies are uniting to strike a better deal with the Quebec government after it implemented tax changes that some companies say will cost them nearly two-thirds of their revenue next year.
Last spring, the government added in the budget a 65% cap on eligible expenses that international film studios can claim with tax credits when they outsource work to visual effects and production companies. animation operating in Quebec. The original grant, which had no cap, was introduced in 1998, and the government says it has become too costly.
The tax change came into effect on May 31, and as a result, visual effects and animation studios say major film companies have less incentive to tap Quebec expertise.
Véronique Tassart, director of mergers and acquisitions at Cinesite, said her company and other visual effects and animation studios will submit a series of joint proposals to the Quebec government in the coming months, before the next budget is tabled. .
We want to propose different solutions that would allow the government to achieve the savings it is looking for without destroying the industry here in Quebec.
Véronique Tassart, director of mergers and acquisitions at Cinesite
Mme Tassart raised the idea of implementing a rule so that contracts between international studios and visual effects and animation companies require a minimum of 40 to 45% of workers based in Quebec. In this way, she noted, the government gets investment for its money.
Many companies already ensure that around 65% of the labor on a contract comes from Quebec; but for some contracts, she said, the percentage of local labor is “much lower.”
Another proposal they will put forward is for Quebec to increase the cap so that the province remains competitive with Australia and France, where the tax environment is more favorable, she said.
“The effect of a bomb”
Already hard hit by strikes by Hollywood screenwriters and actors in 2023, Mme Tassart says Cinesite was looking for a rebound — then the tax credit change had “a bombshell effect.” Last spring, a few weeks after the government’s plan was announced, Cinesite lost three contracts representing a third of its annual budget, she said. Cinesite, which had 600 employees in Quebec in visual effects and animation in 2022, now has 400. Other layoffs are expected, she said.
The government’s decision to review the tax credit was legitimate, but it went too far and hastily, according to Mme Tassart.
After surveying 28 visual effects and animation studios working in the province, the Quebec Cinema and Television Bureau (BCTQ) found that they expected to lose around 25% of their revenues in 2024 and 63% by 2025. The BCTQ indicates that the industry generated revenues of 1.3 billion in Quebec last year, but in May, before the tax change came into force, it said it expected this figure falls to 393 million by 2025.
The BCTQ indicates that Digital Dimension, based in Montreal, closed its doors in May and that two other studios are expected to close in the next six to twelve months. He expects four international studios operating in the province to relocate their work elsewhere. In 2022, Quebec employed 8,000 people in the visual effects and animation industry. Today, the BCTQ says the number of employed Quebec people has fallen to 3,100, and more job losses are coming.
Framestore, which produced all the visual effects for barbie in its Montreal offices, is also trying to obtain concessions from the government. Chloé Grysole, general manager of Framestore Canada’s Canadian activities, maintains that the tax changes increase by 10% the bill for film studios to produce visual effects in Quebec.
“We are world leaders at the moment and the incentives have always made it a matter of course to make Quebec work. Now, with incentives increasing in France, the United Kingdom and Australia, it’s more of a question mark than before, and that’s problematic for us in the long term,” she said. declared.
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Filmmaker Denis Villeneuve
Quebec filmmaker Denis Villeneuve, the man behind Hollywood blockbusters like Dune And Blade Runner 2049describes the decision of the Quebec government as a “huge error”.
In a recent interview with The Canadian Press, Denis Villeneuve said that film studios want to employ Quebec talent to make films, but that all that is now under threat.
The old tax credit structure, he said, was competitive with other countries. Without it, “we will lose thousands and thousands of jobs, and that was a lot of money coming back to the province.”