EC OKs French vid game tax initiative


BRUSSELS -- The European Commission has greenlighted a French initiative to apply movie tax breaks to the country's burgeoning video games industry.

The commission -- the European Union's antitrust authority -- said Tuesday that the tax credits could be awarded only to video games that meet criteria of quality, originality and contributing to cultural diversity. An investigation that began last year concluded that the measure qualified as state aid to promote culture.

However, the EU regulators forced Paris to change its original proposal so the tax break would not give the French video game industry an unfair advantage over others in the union.

French officials say video games are a cultural product and should enjoy the same state benefits as cinema. But commission officials said the initial French plans were so broad that they could have been claimed for car racing and other games with no cultural component.

"The French authorities have made significant changes to the scheme so as to essentially target video games with cultural content and minimize possible distortions of competition in the European market," EU Competition Commissioner Neelie Kroes said.

The four-year program will allow game developers to deduct up to 20% of production costs of certain games, including subcontracting costs.

The French move follows that of Canada, which has seen an explosion of video gaming activity since the introduction of tax breaks in Quebec.