Video game tax credit helping Windsor company under review
Wednesday, March 18, 2015
Changes could be coming to a tax credit that's helping Windsor-based video gaming companies.
The Ontario Interactive Digital Media Tax Credit is under review by the province.
The tax credit pays up to 40 per cent of labour costs for companies, like Windsor's Red Piston, which develops video game apps and has received the tax credit twice.
"It goes back into the company, helping us stay cash-flow positive, and keeps people on the payroll. It's even let us hire people," said Ali Al-Aasam, co-founder of Red Piston.
Along with two friends, he started his company in 2010, only making use of the credit once the company began expanding, he said.
Today, Red Piston has 17 employees and can count 75 successful apps as well as contracts with automotive companies, according to its website.
Tax credit use expanding
As the digital media industry has grown, so has the use of the tax credit.
In 2009, 227 projects received $9.6 million. By the 2012-13 fiscal year the number of projects grew to 1,015 and the industry received $75.2 million. That was almost 20 times more than what was given through the provincial tax credit for the book publishing industry, which received almost $4 million.
Overall the amount given to video games made up 17.5 per cent of all tax breaks given to creative industries by the Ontario government in 2012-13.
But last fall the provincial government announced it would be reviewing all tax credits for "effectiveness, efficiency and sustainability," BlaneMcPhail, the press secretary for the minister responsible for the program wrote in an email.
He said the broad eligibility for companies that qualify for the interactive digital media credit is limiting the government's ability to target innovative products. Both The Globe and Mail and Postmedia Network Canada Corp. have reported receiving the credit.
But for small start-ups like Red Piston, which the three founding members created after being laid off, government subsidies allow for innovation without a lot of risk. Al-Aasm said there is potential for his company to double or triple the staff if the subsidy is continued.
But if the tax credit is curtailed, he may not be able to do that, he said.
"It's more pivotal now we're a larger company, when it was just the three of us, we didn't know what we were getting into. It was all fun and games," he said. "It helps us level the playing field."