Publishers Use US Tax Code to the Tune of Billions
Posted on Monday, September 12 @ 10:00:00 Eastern by Daniel Bischoff
Like it or not, video games are big business. The games we anticipate and watch through development grow in value every day until their release. The industry holds titles to some of the biggest product launches in history. Games rake billions of dollars in, and most of that money goes to the publisher.
And remember, business is all about money, so it's no surprise that publishers do what it takes to hold on to that revenue, especially when Uncle Sam comes once a year to collect taxes on those billions. An article in The New York Times has shined a spotlight on Electronic Arts's methods around the IRS.
At 35%, taxes on corporations can take quite a bit of wind out of company sales, so in 2004, EA hired Glen Kohl, former employee of the Treasury Department, who now lobbies for federal tax breaks for companies with established offshore subsidiaries in low-tax countries. EA now holds 50 such subsidiaries in countries like Mauritius.
I don't even know where that is.
EA also keeps $1.3 billion offshore so that it's not taxed in the United States. It's also well-known that Canada has gone out of its way to attract video game development studios to some of its fine cities. Montreal in particular netted Ubisoft $321,000 for every job it relocated to it from the United States. Canada also offers a tax credit equal to 37.5% of a developer's payrolls.
I'll spare you the snarky comments and political opinions I have swimming around in my head right now.
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