Better tax credits lure B.C. video game makers to Ontario

Video game developers, and film companies, hunt for greener pastures with richer incentives

Rockstar Games, maker of the hit video games Max Payne 3 and Bully, recently announced it is shutting down its 35-person Vancouver studio and expanding operations in Oakville, Ont. The announcement comes on the heels of the departure of UbiSoft and Radical Entertainment.

The reason for the exodus: taxes. More specifically, the lack of generous tax credits used to keep game makers in town. The B.C. government introduced its first major break for video game developers less than two years ago, offering a 17.5 per cent tax credit for labour costs. At the time it was a significant lure, but it hasn’t stopped companies from looking for greener pastures—much greener pastures, it turns out. The Ontario government offers a tax credit for 37.5 per cent of labour costs. Quebec now has an equally generous subsidy. On top of that, the provinces also offer a much lower cost of living for employees compared to Vancouver.

Many analysts argue that increasing tax credits is hardly the smartest way to establish a healthy, permanent industry and long-term economic growth. “The problem is, it becomes a bit of a one-up game, where everyone tries to beat each other at different rates,” says Peter McCaffrey, a policy analyst at the Frontier Centre for Public Policy. “There’s always going to be somewhere else that’s cheaper because they offer a particular incentive, but I don’t think that’s sustainable.”

Canada’s film industry has seen a similar fight between provinces luring companies with richer and richer incentives. This month, Saskatchewan broke that trend and lowered its tax credits to 25 per cent from 45 per cent. As a result, Vérité Films, which was the producer of Corner Gas, announced it was moving the bulk of its company from Regina to Toronto, where the provincial tax credit is as high as 40 per cent.

“Anytime you cross the threshold of a 20 per cent tax credit, you really are beginning to buy the business,” says Pat Bell, B.C.’s minister of jobs, tourism and innovation, when asked about the effectiveness of video game subsidies. “There’s limited value in terms of what it’s providing.”

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