The controversial tax credits to boost Quebec`s multimedia sector introduced more than a decade ago appear to be paying off: in 2007-2008 the industry employed 13,200 workers and generated $1.1 billion in revenues, according to a recent study.

Over 80% of employees working in multimedia have full-time jobs and most are men under the age of 34 according to government survey of 690 companies published by the Observatoire de la culture et des communications du Québec (OCCQ), which compiles statistics on the cultural industry.

In 1997 the Parti Quebecois government introduced tax credits which refund companies up to 37.5 per cent of salaries. The credits were highly controversial, as they forced some firms to move to specific districts of Montreal – the Cité Multimédia and Cité du Commerce Électronique — to take advantage of them. The Liberals killed that strategy five years ago, but said it would honor its commitments to companies already set up in the designated sites until 2013.

The tax credits have also been criticized for artificially protecting the industry from market forces and hence ultimately making it less competitive. In 2009, Ontario introduced its own version of the tax credit to persuade gaming giant Ubisoft Entertainment to open a Toronto studio.

The study also found that two-thirds of Quebec multimedia companies are small, with annual revenues of $100,000; only 17% of them had revenues exceeding a million dollars.

Last year, the Liberal government expanded the credits to information technology companies, refunding 30 percent of salaries to promote e-business and stimulate productivity. The ‘tax credit for the development of e-business’ is aimed at tech companies with at least six employees. The amount of the tax credit for an eligible employee will be capped at $20,000 a year.

The new credit will cost the provincial government $20 million in 2008-2009, rising to $200 million in 2012-2013.