Payroll tax credit hurts locals: CEO
A local tech CEO says a provincial payroll tax credit — intended to help create jobs — is making it more difficult for companies like his to hire and is giving video-game makers an unfair advantage.
“Every CEO I speak to in Montreal and in Quebec, their No. 1 challenge is attracting young employees and technology employees,” says Eric Boyko, the CEO of Stingray Digital Group, which sells music services to other businesses.
He says that Quebec’s multimedia tax credit, which subsidizes salaries at video-game companies, is allowing them to offer workers more money and lure workers away from other tech companies.
The result, he says, is that it encourages the growth of branch offices in Montreal, rather than head offices.
With Quebec’s unemployment rate sitting at an all-time low of six per cent and high demand for engineers, he says the provincial government doesn’t need to be giving money to foreign companies.
Introduced in 1996, the refundable tax credit currently subsidizes between 26.25 and 37.5 per cent of the salaries of people developing video games and other interactive multimedia products. It costs the provincial government around $150 million per year, according to the 2016 provincial budget.
The provincial government says the credit has helped create thousands of jobs. In April, when California-based Electronic Arts, the fourth-largest video-game company in the world, announced plans to hire 500 people in Montreal during the next 10 years, Quebec Finance Minister Carlos Leitão said the credit had helped create a “competitive fiscal framework” for the expansion.
But according to Boyko, demand for technology workers in Montreal is so high that when foreign companies announce they’ re creating jobs in Montreal, they’ re really stealing workers from locallyheadquartered businesses.
But a spokesperson for Montreal’s largest video game studio, a subsidiary of French company Ubisoft, says the company — which employs more than 3,000 people in Montreal — is creating jobs that wouldn’t otherwise exist.
“The war for talent isn’t a local challenge, it’s a worldwide challenge and we have been extremely active in developing a workforce that didn’t exist 20 years ago,” says Cédric Orvoine, Ubisoft Montreal’s vice-president of Communications and Human resources.
“We also contribute to growing the workforce by attracting international talent to Canada,” she says, “20 per cent of our workforce is international.”
She says the company employs people with a wide variety of skills, including artists and animators as well engineers.
Boyko made the comments last week as he announced plans to hire 400 people at his company’s Montreal headquarters during the next five years.
He says the challenge of hiring technology workers doesn’t just apply to tech companies, he says, as technology plays a growing role in other industries, and businesses in a wide variety of sectors are feeling the pinch.
“It’s not just Stingray,” he says. “Every traditional company has to invest in technology.”
The competition for staff has also driven salaries for computer engineers up by 20 to 30 per cent, Boyko says, to an average of $80,000 to $120,000.
Quebec’s video-game industry currently employs 11,000 people at 140 companies — the vast majority of which are Quebec-based small and medium-sized businesses, Audrey Cloutier, a spokesperson for Quebec’s Ministry of Finance, wrote in an email.
“The government’s support for video-game companies has resulted in significant economic and fiscal benefits. Several studies, notably those carried out within the framework of the Quebec Taxation Review Commission, show that the tax revenue for the government of Quebec generated by the sector is greater than the expenditure related to the tax credit,” she says.
There are also other benefits, including increased dynamism in certain neighbourhoods, and it has given Montreal an international reputation in the video-game industry, Cloutier says.
Boyko has less problem with local video-game companies getting government support, and he would like to see the credit scrapped for large foreign companies. He says he’s not interested in seeing a similar credit created for other tech businesses.
He says that even if large videogame companies were to leave the city, local companies would hire everyone within six months.
The gap between the number of people needed by Quebec’s technology industry and the number of people with the skill and training to work in those jobs is expected to reach 44,400 by 2021, according to the Information and Communications Technology Council, a federally-funded industry group.