The cuts proposed by the government regarding the tax credit for multimedia titles (CTMM) could create “a decline in the footprint” of the video game industry in Quebec and would be “a brake on the development” of the industry’s activities in the province.
This is what a study by the PwC firm commissioned by the Quebec Video Game Guild reveals. The financial viability of small studios, the reduction in opportunities to hire new workers and the decline in competitiveness are at the heart of the concerns of the organization, which brings together more than 300 studios in the Quebec video game industry.
“What struck us most in this study is that the companies that are most directly impacted by the proposed modifications to the CTMM are small businesses, small employees,” says Jean-Jacques Hermans, general director. of the Guild.
The 2024 provincial budget proposals include, among other things, a 10% reduction in the rate applicable to each component of the refundable tax credit over four years — from 37.5% in 2025 to 27.5% in 2028 — and the introduction of an amount excluded from the CTMM for each salary. For 2024, it is $18,056 and will be indexed annually.
The Guild is currently participating in discussions with the government to try to reduce the impact of the cuts on independent studios.
The little ones suffer
According to the study, the effect of these measures would be even more negative for studios that are still starting or growing “due to the gap between the initial expenses linked to the design of a video game and the moment when the product is marketed”.
The study thus estimates that the new amount of CTMM in 2028 for a start-up studio would be 68% lower than what it currently receives, and 46% for a growing studio – which the study qualifies as having commercialized at least one game, but less than five.
Post-production or support studios, also smaller, are not faring any better. The study says it expects these studios “to be most affected by these changes and may not survive the cuts.” For these companies with generally lower salaries, the impact could range from 39% to 54% reduction in the amount received.
For large studios based in Quebec, such as Ubisoft, the amounts received in tax credits could be reduced by 16% to 38%. Even if “we don’t think that, in the big studios, there will be a major impact in terms of jobs”, the effect will be seen much more in the investments of these studios in Quebec, believes Mr. Hermans.
Instead of investing or launching projects in Quebec, international companies “will invest elsewhere where they have better advantages,” he summarizes.
According to him, the CTMM was a driving force for the industry in Quebec, which allowed “our small province of 8 million inhabitants” to position itself in the top 5 in the world. Moving away from its 1996 mission to create jobs, the CTMM “has become a competitiveness tool.”
“If the impacts of the modifications to the CTMM materialize in a loss of overall vitality of the sector, Quebec could lose its competitive advantages [autre que les incitatifs fiscaux] compared to other jurisdictions — for example, access to skilled labor and service businesses,” the study’s researchers theorize.
Fewer young workers
The provincial budget also proposes removing the $100,000 cap, which put a limit on an employee’s eligible salary, which might seem like good news. The study indicates that in theory, if the credit gains from salaries above $100,000 “equal or exceed the credit losses suffered with respect to lower salaries,” removing the cap “could result in a neutral or beneficial result.”
However, in practice, “there is no studio, at the time this report is written, which is in this situation”, we can read in the study.
The only effect of this decision is therefore negative: it “encourages companies to hire seniors and no longer graduates or juniors,” says Jean-Jacques Hermans. For the general director of the Quebec Video Game Guild, the impact is “significant” for graduates in the sector, who will have greater difficulty finding employment.
Even if Mr. Hermans understands that the government must “take cutting measures”, he deplores the “ideology” of the government, which “tends to help large businesses and promote value-added jobs, that is- i.e. the big earners.” A strategy which is not adapted to the video game industry according to him.
“In the gaming industry in Quebec, three-quarters of the companies are companies with 20 employees,” explains Mr. Hermans. “For these companies with 20 employees or less, the CTMM expense is minimal: it’s 60 million out of the 350 million it costs in total,” he estimates. “Yet it is on these employees that the impact of the cuts is greatest. »