Alberta to Eliminate Digital Media Tax Credit
If you’ve ever wondered why so many gaming developers and publishers have studios in Canada, it’s because of various forms of government support given to these companies to create jobs. Various levels of government have provided funding to companies in the forms of loans, grants and tax breaks.
One province that just put some more skin in the game to promote gaming and similar digital industries has just gotten right out of it. The recently elected government of Alberta has announced that their upcoming provincial budget will eliminate the province’s Interactive Digital Media Tax Credit which might leave some current and future plans for developers in the province in question.
In 2018, the then NDP-led government of Alberta announced a tax credit for gaming and digital media companies that would cover 25% of the salaries and bonuses of staff and an additional 5% for employees from a “diverse or under-represented background.” At the time of the tax credit’s creation, it was reported that British Columbia, Quebec, and Ontario, the provinces where the majority of video game development happens, had similar tax incentives.
In 2019, the United Conservative Party won the majority of seats in the Legislative Assembly of Alberta and formed government. The new government is changing the approach to job creation with a switch to a lower corporate tax rate and increased tax deferrals through changes to the capital cost allowance (amortization expenses of capital project costs for tax purposes).
Coinciding with these tax changes, the province is eliminating five tax credits:
- Alberta Investor Tax Credit
- Community Economic Development Corporation Tax Credit
- Capital Investment Tax Credit
- Interactive Digital Media Tax Credit
- Scientific Research and Experimental Development Tax Credit
Per the budget, the thinking is that a lower overall tax rate will make up for the loss of the tax credits as “[t]hese measures provide a much greater boost to overall business competitiveness than targeted tax credits.”
Of course, these changes weren’t met with much positivity in Alberta’s gaming industry. Trent Oster, CEO of Beamdog and co-founder of BioWare, succinctly stated, “I felt betrayed.”
Oster noted that while Alberta’s outgoing digital media tax credit was not as good as other provinces, he “was really hopeful.” Now, the company’s plans to expand are being reassessed and Oster suggested that Beamdog may start looking at other locations. Regarding the lower tax rate, Oster told the Calgary Herald, “A four per cent corporate tax cut doesn’t help establish a new industry, it just helps make existing industries more profitable.”
New World Interactive, a Colorado-based developer best known for the Insurgency series, announced the formation of a Calgary, AB studio in February 2019. Already, the company seems to have soured on its northern expansion. NWI President and CFO Keith Warner told the CBC, “[O]ur process of bringing the right people in and growing the ecosystem here is slowed down substantially if not completely halted.”
As of writing, there has been no comment from Alberta’s most famous game development studio, BioWare. However, the developer just opened a new studio in Edmonton in September and Casey Hudson praised the tax credit during the launch of the new studio. With speculation rife over the future of BioWare, the cancellation of this tax credit will not ease rumours over what EA may do to the recently underperforming studio.
Digital media isn’t the only sector that is being hit hard by the upcoming Alberta budget. Public service jobs are being cut as is funding toward post-secondary education. Changes to kindergarten to Grade 12 education are being reviewed for cuts to be implemented in future. Alberta’s largest economic sector is the oil and energy industries and this budget would do nothing to dissuade one from believing that is the current government’s biggest priority.