EA headlined in US tax break report

Monday, 12 September 2011 00:37 GMT By Brenna Hillier

This weekend’s on dit is a report exposing gaming companies’ access to substantial tax breaks in the US – making particular note of EA.

A somewhat scathing report from the New York Times describes the games industry as one of the most “highly subsidized businesses” in the US, thanks to “deductions, write-offs and credits mostly devised for other industries in other eras”.

The report details tax breaks created in the 1950’s and 1960’s, before the US games industry’s rise to a business with $15 billion sales per year, which are now leveraged by developers and publishers.

In the US, the corporate tax rate is 35 percent, and with EA’s reported global profits of $1.2 billion in the last five years, that puts its baseline tax responsibilities at $420 million – but EA confessed to paying just $98 million in that period.

EA’s financial reports claim a net loss over that period thanks to “deferred revenue, deductions for executive stock options and a variety of accounting requirements”, strategies other publishers described as less aggressive than those used elsewhere.

EA reported $6 billion in software development costs, just one of a number of perfectly legal deductions available to it, including “tens of millions” in research and development costs. The mega-publisher has been a vocal advocate of further US tax assistance to the games industry.

The report concedes that tax breaks accessed by games companies are also available to other industries, including manufacturing.

Thanks, Joystiq.

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