Quebec’s latest budget includes a downward revision of tax credits granted to the multimedia industry, a measure which could have the opposite effect to that anticipated by the Legault government. This is what an impact study commissioned by an organization in the video game sector reveals, thus confirming the fears expressed by the visual effects sector.
“It is certain that the budgetary measures will have an impact beyond what the government anticipated,” summarizes the general director of the Quebec Video Game Guild, Jean-Jacques Hermans, sharing with The duty some highlights of the analysis carried out by the firm PricewaterhouseCoopers.
Part of the reduction in credits to multimedia companies concerns salary assistance. Starting in 2025, Quebec will reduce wage assistance in a way that penalizes businesses with workers whose annual salary exceeds $100,000 less.
Perhaps Quebec’s idea was to encourage businesses to raise wages or hire more experienced workers. However, there are not tons of them, both in video games and in visual effects, notes the Guild. “It will create more demand for quite rare senior workers, but in the meantime, schools and colleges produce cohorts of 900 to 1000 new graduates each year. What are we going to do with these people? » asks Mr. Hermans.
It is to answer this question, among others, that the Quebec Video Game Guild commissioned an impact study, the results of which were obtained a few days ago.
Video game SMEs more affected
His conclusion: Quebec SMEs with 100 employees or fewer, which make up more than 80% of the Quebec video game industry, could lose “45 to 68%” of the credits they had obtained until now. Service companies, those which produce on behalf of a third party, will lose 45 to 55% of their credits. Large companies with 100 or more employees will lose 16 to 25% of their credits. “The big studios will be less affected, because they have more big salaries, which will have a mitigating effect on the cuts in credits,” summarizes Jean-Jacques Hermans.
Which explains the reaction of the leaders of the major studios to the announcement. Asked about this, the boss of Epic Games in Montreal, Alain Tascan, predicted that studios like his will not feel threatened by these budgetary measures. For them, the availability of talented workers is more important than tax credits — and Quebec is full of talent, he said in short.
Still: these reactions are a bit contrary to Quebec’s desire, which was to continue to encourage local businesses while slightly reducing aid to the multimedia sector in the broad sense.
If they harm the health of the industry, then, what is the objective of the Legault government’s cuts? The answer is probably linked to the budget deficit, believes Jean-Jacques Hermans. In recent months, other industries have notably criticized the generous tax credit on wages for workers in the multimedia sector, which stands at 37.5%. “Quebec perhaps wanted to send the signal that it is capable of taking matters into its own hands” despite its deficit, says the general director of the Quebec Video Game Guild.
In the visual effects sector, $6 lost for every dollar saved
In his budget for the 2024-2025 fiscal year, the Minister of Finance, Eric Girard, also changed the way in which the credits granted to the visual effects sector will be calculated from May 31. In this case, Quebec companies have stepped up to sound the alarm.
This credit is granted by Quebec to foreign companies that do business with local visual effects suppliers. It will increase from 20 to 25%, but it will now be capped at 65% of the value of the contracts. Ultimately, the planned changes represent a 28% reduction in the amounts granted to these international customers. With international competition very strong, Quebec businesses fear a significant drop in their revenues.
An impact study commissioned from the consulting firm AppEco by the Montreal studio Rodeo FX, a world leader in the sector, precisely estimates that for each dollar saved by Quebec thanks to this measure, six dollars will be withdrawn from the Quebec economy. Rodeo FX attempted a media outing to make the Legault government react and must do it again on Wednesday morning by holding a press conference on the impact of these measures.
The Quebec Video Game Guild, for its part, submitted its study to the government. She hopes that “if the impact is not as expected, we will re-examine the formula”.