Canadian Game Industry Tax Credits - Gamespot

Emma Boyes, out of Gamespot UK, brings us a well researched and interesting piece on Canada's game development tax incentives.

It looks at the way the Canadian Government has incentivised the game industry, and the way many other countries have failed to, and why. In particular, she looks at the (increasingly tragic) case of UK game development.

She outlines the different kinds of tax incentives available to Canadian developers - from basic R&D credits that have been in place for decades, to incentives for employing digital animators to incentives for sound recording.

Anyway - kinda business focused compared to what I usually put up here, but I think it is a really interesting article and definitely worth a read.

Comments

[James O]

Interesting. I suppose this development is no real surprise, but it does sadden me some (as a laissez-faire capitalist) knowing that we, too, are on the dole (well OK, not technically because it's just a tax credit, not a subsidy. Bear with me here.)

More topically though, what concerns me is that this relationship to the government will result in increased government oversight - you can't invite them into your house and not expect that. Here in the US, with politicians who gladly pander to the public about the horrors of videogames (and one of the worst offenders is the front-runner for the Democratic party for '08) I think this is reason enough to be concerned.

Of course, the flip side to that is that with increased government recognition comes increased ability to influence legislation. It'll be harder to push anti-game bills through Congress when you've got the IGDA's rabid attack lobbyists watching your every move.

[Clint]

>>this relationship to the government will result in increased government oversight

Yeah - I know what you mean. Ever since we crossed the 1500 employee mark we've had a government 'liaison' on staff. He had someone deported last month for an immigration violation and a couple other people have gone missing entirely. That guy creeps me out. I don't know who to call. I think I'm being followed...

[James O]

Ah, specifically I was meaning censorship and increased regulation, like a government-run ESRB.

I can't quite tell if you're being sarcastic about the government liaison, or if Quebec is really that wacky ;)

[Clint]

James

The fact that you can't tell I'm being sarcastic is even more scary than the implications of the sarcasm to me :)

Anyway, censorship and increased regulation seems like a non-issue to me. I have a form that I have to fill out for the Government once a month which validates that I have participated in a certain number of hours of training activities for employees (such as if I give an internal presentation or something). I tick one box per activity/per person (some months I have no training to report). It takes me exactly 90 seconds.

I think you are far more likely to be censored by a big corporation forced to meet quarterly targets than you are to be censored by a big clumsey government. Corporations are powerfully incentivised to churn out lowest-common-denominator entertainment - it's a "take out the flavor and add sugar" approach. Governments, by contrast, are powerfully incentivised to promote (their) culture. The risk with this, of course, is that you might not care for the culture which a given government promotes (countless unpleasant examples of that - at least one of which leads to a tea party in Boston, so I'm not unsympathetic to your perspective).

I think government provision of financial incentives to corporations reduces the pressure on corporations to make their quarters (simply by lowering operating costs) allowing them to put more trust in their creatives and enabling them to take larger risks, do more R&D, and ultimately provide more culturally relevant works. If the government in question has a very radical cultural agenda, you can have bad problems very quickly (like the sarcastically aforementioned jackbooted liaisons) - but the idea of Canada having a 'radical cultural agenda' is a non-starter - we can't even fight to hold onto our hockey teams :)

[James O]

Heh, well, I know that up until recently it was illegal to own private health insurance in Quebec. You could say I'm somewhat pre-disposed to thinking the Quebec government is overbearing. ;)

Anyhow, the point I was trying to make that closer relationships to the government mean they'll have more of a say (or try to, anyhow) in what ESRB category a game gets assigned. Given that an "AO" rating is basically the death of a product, governmental bodies could censor games that way (by coercing the ESRB to rate a game accordingly.) Alternately, they could try and continue passing legislation that limits the availability of "M" rated games, and then pressure the ESRB to rate a game "M," or pressure the developer to change the content to meet a target rating (e.g. say, that's a nice game you've got there; shame if it were to get an "M" rating huh?)

If the government hands out tax credits to companies there will be strings attached. They might relieve companies (to some degree) of "market censorship" by alleviating some cost concerns, but I don't doubt there will be other consequences.

[James O]

To expand it into an example, say I'm the Congressional representative for the district where the next "Postal" game is being developed. The development attracts media attention and controversy. It's an election year, so I take the easy route and condemn the developers. When the public learns the company is receiving tax credits to work there, people demand they pack up and leave. I can choose to support the company and their controversial content, or I can just withdraw their tax credit status. Maybe now with that done, the company can no longer operate profitably, and thus folds.

Anyhow, like I mentioned in my first post, since we're talking about tax credits and not outright subsidies/grants, this isn't such a problem yet - the government isn't actually funding the development, merely letting the company keep a larger share of its fair profits. Who knows where that road leads, though? I just think that the industry should consider any governmental support with a skeptical eye.

[Clint]

Well, I think we look at things pretty differently. Don't the Wal-Marts and Targets of the world already effectively censor AO rated games by refusing to shelve them? For that matter, MS won't allow AO rated games on their console (not sure about Sony or Nintendo - but I assume it's the same). The censorship you fear from government would 'merely' be one of enabling a corporate censorship that already exists - no?

I don't see the difference between this threat of government censorship you mention and the threat of corporate censorship except in that corporate censorship is happening right now and government censorship (in the US and Canada) is not.

If anything, there is accountability for government censorship... but not for corporate censorship. If a government censors something civil liberties organizations can (and will) make a big, big stink. If a corporation censors something, they can say 'yeah - we censored that - we want to be profitable' - case closed. Corporations have no responsibility to protect freedoms of expression.

As for Quebec health care - or Canadian health care for that matter, recent changes in our health care system - in my opinion - are catastrophically bad. They are political cow-towing to powerful medical and pharmaceutical industry lobbying. It will lead to a great reduction in the quality of life for all Canadians over the next few decades. I would argue that socialized health care in Canada and in many other nations is in fact the proof that well measured government intervention enables societies to achieve things that their parallel economic structures otherwise inhibit.

[James O]

No doubt about it, the censorship here would be a joint effort between large retail corporations and the government. Thus, I think we should be cautious about any move that would increase the government's ability to enable corporate censorship. That is to say, the retailers are indeed responsible, but we should be wary of the government (through lobbyists and moneyed interests) trying to become a willing accomplice.

The fundamental difference is that governmental censorship is coercive - its the law, break it and suffer consequences. Private censorship is non-coercive. In some cases it might not seem to matter, particularly in cases where one retailer has a monopolistic (or at least monopolesque) hold on the market. The difference is real enough though.

You say that the government is accountable here, and that's true, but so are the retailers - consumers will flock to a better alternative if one is available. However, this isn't an issue that a large population cares about, so it won't have any kind of economic impact now - but the same holds true for governmental action (the videogame playing constituency is much weaker than both liberal and conservative pro-family/values groups.)

Anyhow I wasn't trying to derail the topic with the healthcare mention; I just brought it up to show that if the Quebec government is willing to prevent the private purchase of a public good, it's a government that has no trouble throwing it's weight around regardless of who gets hurt.

[Funky J]

Damn.

You made me read Gamespot.

But I will make a note of this article - the Australian Labor government have promised to look into tax cuts for game devs, and this is a good reference.