B.C. gaming studio says Alberta budget throws wrench in Calgary expansion plans
Province axes targeted tax credits, says across-the-board corporate tax cut better
A successful Vancouver gaming studio that had pegged Calgary as a no-brainer location for expansion says Alberta's new budget has crippled that business case.
East Side Games, which specializes in mobile games and employs roughly 150 people in B.C., says Alberta's decision to eliminate two industry-specific tax credits makes the province a much less attractive place for tech investment.
The new UCP budget scraps the Interactive Digital Media Tax Credit and the Scientific Research and Experimental Development Tax Credit.
The Interactive Digital Media Tax Credit, introduced under the NDP government last year, offered a 25 per cent refundable tax credit for salaries and bonuses in the digital media industry.
"With [Premier Jason] Kenney having just taken it all away, now the operating costs in Alberta would be significantly higher than running our business in B.C.," said East Side Games founder Jason Bailey in an interview with the Calgary Eyeopener.
Alberta's budget announces the end of five targeted tax credits and reaffirms the UCP's election promise to slash the corporate income tax rate from 12 to eight per cent over the next four years.
Income tax cut not helpful, says studio
The government says this across-the-board corporate income tax cut will do more to boost job creation and economic growth in Alberta.
But Bailey says that math doesn't work for his business, because his company doesn't make much profit. Instead, it reinvests most of its revenue in job creation and growth.
"Our largest expense is paying our people. And so having a tax credit come back against the payroll that we're putting out is significantly more than the small savings on the corporate tax rate," Bailey explained.
Bailey said East Side Games recorded profit of about $3 million last year, whereas its payroll expenses totalled closer to $10 million.
Bailey said he's not writing off Calgary entirely, as the city still has a sizeable tech talent pool and a relative edge in affordability over Vancouver.
"There is still a small chance we do it," said Bailey, although it's a more complex cost-benefit analysis to undertake now.
Alberta tech companies brace for impact
Regardless of whether East Side Games decides to make inroads in Alberta, the B.C.-based company expects to take a hit as a result of the new UCP government tax scheme.
Bailey said many of the design studios he contracts with in Edmonton and Calgary will be forced to pass their higher costs on to him once they lose those tax credits.
"The companies that are working out of there, suddenly they're going to find that their costs have gone up dramatically overnight," he said.
"A lot of these younger companies aren't profitable at all, so a reduction in corporate tax rate does nothing for them."
Last year, the province estimated more than 50 interactive digital media studios operated in the province, employing more than 500 full-time workers.
Other provinces have similar digital media tax credits for labour costs. Ontario offers up to 40 per cent, Quebec sits at 37.5 per cent, and B.C. is pegged at 17.5 per cent.
With files from the Calgary Eyeopener.