Why The Video Game Tax Credit Can Do Better

The second reading vote on the finance bill on Friday, December 16 is good news for the video game industry. It confirms the strengthening of the video game tax credit system in France, an aid to the sector which makes it possible to strengthen its attractiveness vis-à-vis extremely active competitors in the field. According to a survey carried out in 2016 by the National Video Game Syndicate and Idate Digiworld, France comes third among the most attractive countries, behind Canada and the United States. And the trend is growing since 56.5% of the companies surveyed consider that France is attractive against 38.2% in 2014.

The Syndicate of Leisure Software Publishers (SELL) and the SNJV therefore welcome this good news. “We had this Damocles sword above our heads,” admits Julien Villedieu, the SNJV general delegate. “Parliamentarians have understood the effectiveness of this measure and its virtuous side”. This reinforcement comes after the 2014 reform which made it possible to lower the eligibility threshold for projects to 100,000 euros and to no longer exclude games intended for over 18s.

Created in 2008, the Video game tax credit allows players established in the territory to deduct part of their video game production expenses from corporate income tax. “This device made it possible to stop the decline of the industry and to preserve employment in France. The very positive outcome of this modest-cost tax measure is also to support the sector’s ambition for growth and innovation in a context of very strong international competition, ”explain the two unions in a joint press release published on Monday, December 19.

Axelle Lemaire, Secretary of State in charge of digital technology and innovation, recently declared that the CIJV “is a very strong signal sent to players around the world”. For the SNJV general delegate, this favorable fiscal ground makes France a potential home base. “More and more foreign companies are watching with interest the evolutions of the CIJV”.

1,300 additional jobs

Strengthening the system voted by parliamentarians will make it possible to reduce deductible expenses from 20% to 30% and to make it accessible to a wider variety of projects. This could generate, according to PwC, the creation of more than 1,300 additional qualified jobs as well as 155 million euros of added value, for tax benefits of 20 million euros over 5 years (in addition to the natural growth of employment and from production). Which is rather good news for a sector which has seen its troops go abroad …

In their 2016 Video Game Barometer, Idate and SNJV note, however, that for many players, this is not yet a panacea. According to them, aid is still too selective, social charges remain too high and it is still difficult to bring in skills from abroad. And banks are still having a hard time getting credit. Four out of ten companies have never used bank credit.

Last but not least, the CIJV is still marginal. “The public mechanisms, although acclaimed by the studios, ultimately contribute only slightly to production. […] It can be seen that recourse to the CIJV varies upwards with seniority. 9.7% of studios under 5 years old use the CIJV while they are 33.3% among those over 10 years old, ”the study said. According to Julien Villedieu, the selectivity rate is 40% for this tax credit. With an approval that can take place after 36 months, there is a lot of self-censorship by companies in the face of this unpredictability. The idea is therefore to make this system even more open.

The changes voted have yet to obtain the approval of the European Commission in 2017. According to Julien Villedieu, this can take from 3 to 6 months. “The idea is to be able to introduce the notification from the beginning of 2017. We have to discuss it with the government,” he explains. But he wants to be optimistic for the future. “Since the creation of the CIJV, there has been a goodwill of the Commission on the device”. It remains to ensure that video game producers actually use it.