We often hear brief mentions of the tax benefits granted to videogame developers in Canada — it’s no coincidence that so many companies have opened up locations in Toronto and Montreal. A recent New York Times report on tax breaks for videogame developers prompted a decidedly negative piece on the subject from Canadian publication Maclean’s. This in turn has led to a fairly in-depth piece from Capy’s Nathan Vella explaining why these tax breaks are handed out and the positive effects they can have.
Capy is an independent developer located in Toronto that created both Critter Crunch (above) and the iOS hit Superbrothers: Sword & Sworcery EP (below). Vella was among the company’s co-founders, and his extensive response to the Maclean’s piece explains how tax breaks helped Capy to go from a work-for-hire developer that contributed to third-party projects it had no real say in to creating original games that it controls. In his words, “Tax incentives helped us take Capy from another faltering licensed game maker and turn it into something that I believe has real value in both the game industry, and in the provinces’ economy.”
Vella went so far as to have an economics expert break down the purpose of such incentives, which was provided in convenient bullet-point form. Essentially, providing a tax credit to a game developers leads to the firm expanding (i.e. hiring more skilled workers or creating its own content), which in turn leads to expanded output (or more employees) that the government can collect taxes on/from. That’s in addition to the money that these new employees spend at local businesses, which can generate more money for the government. It’s a simple way of looking at it, but it shows that the incentives aren’t simply a way of handing out money without getting anything in return.
