A few years ago, video-game developers in British Columbia worked hard to convince the provincial government that the industry deserved a tax credit. With the Interactive Digital Media Tax Credit (IDMTC) set to expire in 2015, they aren’t wasting any time getting ready to persuade politicians that the tax credit should be renewed and even expanded.
Howard Donaldson, president of DigiBC, an association of digital media and wireless companies, said the IDMTC simply “stopped the bleeding” and that more than 5,000 industry jobs have been lost in the province since 2008. At a DigiBC town hall meeting at the Vancouver Rowing Club on February 6, Donaldson told the Georgia Straight he’d like to see the IDMTC continued and the amount raised.
“We’re very happy about the tax credit,” he said, “but when you compare it to what’s out there, it’s very low.”
The IDMTC came into effect on September 1, 2010, and it expires on that day in 2015. It’s good for 17.5 percent of eligible salary and wages involved in the creation of interactive products, including video games, educational software, and simulators. Any company with a permanent studio in the province can register for the tax credit.
The Straight requested interviews with Minister of Finance Michael de Jong and Minister of Jobs, Tourism, and Skills Training Shirley Bond, but neither was available. According to the B.C. Ministry of Finance, there were 28 registrants in 2011–12 and 49 registrants in 2012–13. As of the end of January, 52 companies had filed to receive the IDMTC in the current fiscal year.
NDP technology critic George Heyman, who was circulating among the crowd before the DigiBC meeting, told the Straight that digital industries are “great for our province”. Studies have shown that tax credits bring in more revenue than they distribute, and they increase employment in related industries, according to the Vancouver-Fairview MLA. Heyman said the IDMTC seems like a “win-win”.
“The Liberals promised to expand the tax credit, and we’ll be looking at the budget to see if they keep their promise,” he said.
Provincial officials wouldn’t indicate how much has been paid out through the program, but Donaldson said he was told that it was about $30 million a year. He contrasted that figure with the economic impact of the industry in the province. For each person working in video games, Donaldson claimed, two additional jobs are created, with vendors that contribute to the creation of games and businesses that support developers.
“The tax credit affects the hiring of three people,” Donaldson said.
Which is why Todd Tessier, chief financial officer for Recon Instruments, which develops wearable technology, calls the IDMTC “not a subsidy, but a competitive fiscal policy that is sustainable”. Tessier, who said he “worked closely” with the Ministry of Finance while he was employed by the investment-capital branch of the provincial government, is part of the DigiBC team that will be making a case for the extension of the tax credit.
DigiBC is trying to raise $75,000 from its membership to fund an updated report that will establish the importance and potential of the industry.
“The more accurate our information is, the better position we’ll be in to support the industry,” Donaldson told the audience at the rowing club.
Four panellists shared stories about the IDMTC in an effort to convince the assembled that supporting the upcoming research is worthwhile. They all agreed that, administratively, the program is great, with Silicon Sisters Interactive CEO Brenda Bailey Gershkovitch saying it is “easy to work with and easy to apply for”.
James Hursthouse of Roadhouse Interactive and John Lutz of Electronic Arts joined the other panellists in calling for the IDMTC to be amended so that work performed by contract employees is eligible and for the application fee (between $1,000 and $5,000) to be removed.
Lance Davis, CFO of Slant Six Games—which he noted has “wound down significantly”—said that the studio benefited tremendously from the IDMTC. But because of a lack of communication about the program, Slant Six didn’t apply for the credit in its first year. “I can unequivocally say…if we’d had the benefit of this perhaps one year before, there’s a strong possibility Slant Six would be here today,” Davis added.
Donaldson said informal surveys by DigiBC indicate that there are currently 3,250 full-time employees in B.C. who are employed making video games, the same number as in 2009. In the five years prior, he said, the provincial industry had been growing steadily.
Donaldson said the number of people employed by the sector in Quebec doubled after a similar tax credit in that province was increased—to 30 percent (37.5 percent for French-language products) of all labour costs, including contractors—in 2007. He thinks a tax credit of 30 percent would do the same for B.C.
“At 40 percent, we could create 4,500 jobs,” Donaldson said.