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Video Game Corporations Highly Subsidized by IRS

September 29th

The Internal Revenue Service offers significant tax incentives, including tax deductions, write-offs and credits, to numerous industries. Most notably, the US government offers tax incentives to companies conducting medical research, urban redevelopment and exploring alternatives to fossil fuels. However, these tax incentives are also provided to video game developers.

In fact, the video game industry is now among of the most highly-subsidized in the United States. This is chiefly due to video game developers being able to combine tax breaks associated with software development, online retailing, and the entertainment industry in a manner impossible in most other businesses. Video game developers are now receiving such significant tax breaks that even oil companies are questioning why such businesses should be so highly government subsidized.

Debate Continues over Validity of Tax Breaks

In total, the federal government doled out over $123 billion in tax incentives to corporations in 2010. According to the Joint Committee on Taxation, these corporations included those in industries such chicken farmers, as hedge fund managers, automakers, and oil companies. Estimates state that approximately $15 billion of this amount went the video game industry.

Advocates for these benefits actually claim that without such tax breaks, the United States would forfeit its technological edge over other nations; they claim it is these very tax breaks that allow technological innovators to work and operate within the United States. Without them, the supposition is that the companies would start moving their operations elsewhere, to countries like Canada that offer greater tax subsidies.

While the government accedes that these incentives are excessive, it is far easier to create a tax incentive than it is to eliminate it. Video game companies usually have large staffs of qualified tax attorneys who work to navigate the complex tax code to the company’s greatest benefit.



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