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In this file photo, developers work at the Stingray Digital Group offices in Montreal.Christinne Muschi/The Globe and Mail

A rift is developing in corporate Quebec pitting business leaders who back the province's generous payroll-tax credits system against those who say the incentives are largely helping foreign-based firms poach workers from home-grown ones.

Executives with music technology startup Amp Me Inc. and enterprise search business Coveo Inc. are among those siding with Stingray Digital Group Inc. founder Eric Boyko in denouncing the financial aid Quebec offers to foreign-based firms to expand their technology-related operations in the province. On the opposite flank are executives with companies such as France's Ubisoft Entertainment SA, which says the incentives have allowed it to build a significant presence that has benefited the economy.

"It's really hard to hire information technology people right now," said Amp Me founder Martin-Luc Archambault, who, like other executives, has been forced to hunt for talent in France and elsewhere to meet his needs. "[These people] can go wherever they want and they make everybody bid more to get them. I think the tax credits are good when you have a job creation problem. But we don't have that job creation problem any more."

Mr. Boyko reignited the debate over the efficacy of public aid to business earlier this month when he said his firm, which plans to double in size over the next five years, has had to suspend projects because it can't find enough software developers and engineers to do the work. He acknowledged that other places are grappling with the same problem, but said the situation in Quebec is particularly distorted because taxpayer money is helping foreign companies such as Burbank, Calif.-based Warner Bros. and New York-based investment bank Morgan Stanley woo workers that home-grown companies would gladly hire.

"Why are we financing subsidies for foreign companies so they can steal our engineers?" Mr. Boyko said. "It's like paying American patients to come steal our doctors in our hospitals."

Quebec offers tax credits ranging from 26 per cent to 37.5 per cent on salaries of up to $100,000 for multimedia companies, such as video game producers, that meet its eligibility criteria. Launched about 20 years ago as a way to help Quebec reverse its listless employment growth in information technology, the aid is widely credited for helping the province become one of the world's major gaming hubs. Additional tax credits are also available, including a 30-per-cent credit for the development of e-business. The incentives are open to both foreign and local firms.

"Quebec can't allow itself to lay down arms unilaterally" because other jurisdictions are offering increasingly aggressive incentives of their own to attract high added-value jobs said Hubert Bolduc, head of economic development agency Montreal International, in a recent open letter. "Why change a winning recipe?"

Ubisoft defended its contribution to Quebec's economy, saying it not only hires local workers but also helps attract them to Canada from overseas. The company said studies have shown the tax-incentive programs in place have been profitable for the province. It has 4,000 people in Quebec.

"We've been investing in the development of our Quebec and Canadian operations for the past 20 years and we are extremely proud of what we've accomplished," Ubisoft spokesman Cédric Orvoine said. "We will continue to build on what we've achieved."

That assertion rings hollow for Louis Têtu, chief executive of Quebec City-based Coveo. He said Quebec is essentially paying foreign companies to drain a scarce resource, skilled IT labour, which is desperately needed by local companies creating the real wealth in the economy. Firms such as his aren't faring too badly because they are doing interesting enough work to attract new employees, he said. He said the real pain is being felt by companies in more traditional sectors, such as manufacturing, that are failing to woo people to help them make the jump to greater digitization.

"Everybody talks about the digital revolution. Governments say companies need to make the digital shift," said Jean Laflamme, whose furniture company South Shore Furniture invested early on in e-commerce and just-in-time delivery. "But no one knows where to start. And the people you need for that are not available."

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