The government has played a part in keeping video game companies as profitable as they are, offering tax incentives that bolster the businesses’ bottom lines. Game companies have managed to benefit from a slew of arguably outdated tax credits, deductions and write-offs largely intended for other companies. Gaming companies also take advantage of a 1950s-era tax break, expanded in 1969 to include software companies, that lets businesses deduct research and experimentation costs immediately.
The New York Times reports gaming giant Electronic Arts has raked in $1.2 billion in global profits in the last five years under one accounting method, but under another method, perhaps used for tax purposes, has reported a net loss for EA in that period. The company has reportedly taken advantage of deductions including one that has to due with stock gains on options used by executives. The deduction is available to all companies.
Gaming industry advocates say that the tax subsidies are important in keeping jobs in the U.S., because if they were taken away companies might move more operations to Canada. The industry collectively makes $15 billion a year in domestic sales.
Rich Tax Breaks Bolster Makers of Video Games [The New York Times]