The UK government is calling on the World Trade Organisation to look into the legality of tax incentives in Canada given to the video and gaming industry.
A formal investigation was launched by the UK's Ministry of Culture, Media and Sport which wants the European Commission to call in the WTO to look at the credits being offered, online gaming site, develop, reported.
A department spokesperson: 'The UK government is concerned that state aid offered to computer games companies by a number of federal institutions in Canada may not be compatible with the World Trade Organisation principles'.
UK businesses believe Canadian subsidies are unfair, drawing European game developers because of tax breaks which allow tax write-offs of up to 45% of labour costs, a 37.5% tax credit on wages as well as a 30% credit for small companies and 20% for companies with annual revenues above $20m (£10m).
Margaret Hodge, Culture, Creative Industries & Tourism minister, said these credits contravene EU rules.
Guillaume de Fondaumière, head of French trade association APOM, says the move is a mistake.
'The UK should rather join forces with the France (which made the first move in the 'tax break direction' a few weeks ago) as well as other Euro countries understanding the imperial need to save a key industry and convince the European Commission to widen its horizon on the subject and allow all games to benefit from tax credits and other incentives,' he said.
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