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.