B.C. video-game industry gets some support with new 17.5 percent labour tax credit

The B.C. government has finally decided to support the video-game industry with tax credits. It’s good news for Vancouver’s developers, even if the government still doesn't appear to fully appreciate the video-game industry.

This afternoon (February 3), B.C. finance minister Colin Hansen and minster of tourism, culture, and the arts Kevin Krueger, who called the video-game industry “inspiring”, announced that the province will support game development with a new tax credit.

With the next provincial budget set to be announced on March 2, Hansen also announced an increase in the tax credit available to the film and television industry, as well as to the Digital Animation or Visual Effects (DAVE) tax credit bonus, from 15 to 17.5 percent. Those increases will take effect on March 1.

But the new B.C. Interactive Digital Media tax credit, for 17.5 percent of qualifying B.C. labour costs, won’t take effect until September 1. Hansen said this is because there was “implementation work” that needed to be done. It may be because the B.C. government still doesn’t understand the interactive industry.

In his comments during the briefing at Vancouver’s Rainmaker Entertainment, Hansen kept talking about the importance of film, television, animation, and visual effects companies. “Film and video and digital production and animation are becoming increasingly intertwined,” he said. “There is a growing convergence of technologies.”

True. And you can add video games to that list. But in his remarks, Hansen consistently mentioned video games last, when he mentioned them at all. That may not seem important, but it indicates that video games are not at the forefront of the finance minister’s mind.

The Straight asked Hansen why the government had waited so long to introduce financial support for the video-game industry. “It’s only now that we’re really starting to see that convergence,” he said, “and the inter-relationship between the video-game industry and the film and motion picture industry and the animation sector.”

Which suggests that the video-game industry on its own is not deserving of support. When the Straight put that to Hansen, he simply said that “there has been a lot done for competitiveness and job creation in British Columbia. This is one additional measure.”

Not much of an answer.

Hansen also suggested that B.C. game developers will have to choose between the new tax credit and the existing Scientific Research & Experimental Development (SR&ED, commonly pronounced “shred”) incentive program that is administered by the federal government. He said that the new B.C. Interactive Digital Media tax credit does not replace SR&ED, “but companies can determine which of the two programs actually best meet their needs”.

While Vancouver is a hub in the video-game-development industry, studios have had a rough time in the past couple of years.

Leaving aside the impact of the economic slowdown, provinces such as Quebec and Ontario have been ratcheting up the tax breaks being offered to developers—Quebec’s labour tax credit is 37.5 percent and Ontario’s is 35 percent—and foreign markets such as China have a wealth of skilled and cheap labour.

Vancouver’s development community, led by larger studios Electronic Arts Canada, Propaganda Games (a division of Disney Interactive), Radical Entertainment, and Relic Entertainment, have been actively lobbying for government support that is required, they’ve argued, to put the Vancouver and B.C. scene on equal footing with competing regions.

Without success. Until today.

Howard Donaldson, vice president of studio operations for Disney Interactive Studios and head of Vancouver’s Propaganda Games, is also the chair of the B.C. Interactive Task Force. In his remarks during the briefing, Donaldson said the new tax credit was an “important first step to creating the next-gen digital media hub” in B.C.

Speaking with the Straight afterwards, Donaldson admitted that the 17.5-percent credit was more than the B.C. video-game industry expected when the task force was created late last summer. “Now that the task force has been established,” he said, “we will continue to work to grow the industry.”

In the past two years, studios that were considered for Vancouver have instead opened in Quebec or Ontario. Being compensated for a third of employees’ wages and salaries is a big incentive.

Donaldson said he hopes the new B.C. Interactive Digital Media tax credit will encourage companies to look at Vancouver more seriously. “B.C. has some definite advantages,” he said, invoking the province’s geographical location and the highly educated and skilled employees that are so interchangeable with the film, television, and animation industries.

So while the tax credit may seem small in comparison to other jurisdictions, B.C.’s video-game developers are not about to look a gift horse in the mouth. And the new tax credit could be just the shot in the arm that the sector needs to return to the levels of success and prominence it was celebrated for only a few years ago.

Hansen said he hopes the new incentives will lead to “continued growth” in the various industries. The appeal internationally, he said, will be that B.C. has strengths in all those sectors. “If you’re developing a new production...Vancouver and British Columbia will be one-stop shopping.”

Comments

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12 Comments

Confused

Feb 3, 2010 at 7:20pm

Wait a minute.....

The Georgia Straight is celebrating a handout/tax cut to major international corporations that make products that often contribute to obesity, not to mention various forms of antisocial behavior?!!?! I never thought I'd see the day.

How about the government more money towards homelessness instead of video gaming? Or does that argument only apply to the Olympics?

Stephan Wehner

Feb 3, 2010 at 8:00pm

Just how does this tax credit work? -- Stephan

solocorps

Feb 3, 2010 at 8:46pm

Confused, you're confused.

Research shows that most video gamers are actually more active - in all areas, including outdoor activity - than average citizens. And there is no evidence at all to suggest that playing games contributes to antisocial behaviour.

Perpetuating those false and misleading stereotypes is just tired.

Confused

Feb 3, 2010 at 9:49pm

solocorps, please provide a link to said research. i didn't provide one at first because, to be honest, i didn't really think those points were in dispute. After 10 seconds of googling, here's what I found:

http://www.wired.com/epicenter/2009/08/gamers-are-sad

"The average gamer, far from being a teen, is actually a 35-year-old man who is overweight, aggressive, introverted and ”¦ often depressed, according to a report (.pdf) out this week from the Centers for Disease Control and Prevention (CDC)."

If evidence exists to the contrary, I'm all ears. I'm completely opposed to perpetuating myths - what I said isn't a myth at all. That's not to say that video games don't have positives as well, particularly in cognition.

Honestly, I'm not really bothered by video games themselves. I'm bothered by the fact that our government has decided to single out the video game industry for preferential treatment, leaving the rest of us to foot the bill.

solocorps

Feb 3, 2010 at 11:21pm

Confused, the B.C. government isn't singling out the video game industry at all. The announcement today included bumps to tax credits for other entertainment and media industries, too.

And countless other industries also receive incentives from our governments. Such activities contribute to economic flow.

As for the CDC study you've referenced, even the CDC acknowledged in that paper that correlation does not equal causation.

Confess I can't now locate the research on activity levels of average gamers, but maybe this research will allay your fears about the weight problems of gamers: http://www.physorg.com/news170957243.html/.

As for the antisocial stereotype, start with Steven Johnson's Everything Bad is Good For You: http://www.amazon.ca/Everything-Bad-Good-You-Actually/dp/1594481946/ref=....

Also good is Gerard Jones' Killing Monsters: http://www.straight.com/article/violent-game-play-may-empower-kids/.

Stephan, there was no information provided as to how the B.C. Interactive Digital Media tax credit will work. It seems like those details haven't been worked out yet. Get in touch with the BC Interactive Task Force or DigiBC (http://www.newmediabc.com/) for more information.

Confused

Feb 4, 2010 at 10:45am

solocorps, I'm against "targeted" incentives to any industry. You're right that this also targets other forms of entertainment and media, but what about people in other technology sectors? Why aren't their employers getting any money? How will people in those sectors feel when they lose their jobs just because their employers don't have the hotshot lobbyists that EA has?

And yes, tax cuts can have a positive economic impact. So why not distribute that impact fairly, across all industries, instead of playing favorites?

Pavel

Feb 4, 2010 at 11:08am

Confused, you are not footing the bill. The tax credit merely means these companies pay less taxes. It's only to remain competitive with other provinces. Ask yourself this: Do you want to see the 10,000 jobs in Vancouver all move to Quebec tomorrow? That would do wonders for the economy here.

Loblaw

Feb 4, 2010 at 11:59am

This has nothing to do with how fit or unfit gamers are. That's ridiculous. It's about keeping industry in the Province.

Confused

Feb 4, 2010 at 12:37pm

Pavel, if the company pays less taxes, that means less revenue for our government. To make up for that, either the rest of us pay more, or we see services cut. It's pretty simple.

Of course I don't want 10,000 jobs to move from BC to Quebec, but that doesn't mean it's OK for our government to give into what amounts to blackmail on the part of the industry ("Give us what we want or we're skipping town"). The fact that governments everywhere routinely give into these tactics from corporations and their lobbyists doesn't make it right. It's unfair and bad economics. An equal tax structure across the board is fair for everyone, and will result in more jobs, since we'll see more jobs in industries that can sustain themselves and even grow without special treatment.

Pavel

Feb 4, 2010 at 1:21pm

Confused, I guess we can agree to disagree. An equal tax structure is ideal but if the government deems one industry more valuable (which it did in this case) then there's probably good reason. A billion dollar industry paying reduced taxes still amounts to a ton of revenue. All they are doing is trying to keep that revenue here. And what you call blackmail is simply a lifestyle choice. Would you give up half your paycheck if you knew you could keep most of it in another province? Personally the weather keeps me here, but I know that's not the case for everyone.