Game thinking from Adam Clare

Category: BusinessPage 41 of 44

Tax Breaks: A Misunderstanding

Jesse Brown has published an article that has enraged the entire Canadian games industry – and rightly so! Brown wrote a piece called Grand theft tax break that is based off of a New York Times article on tax breaks in the USA for the video game industry there.

Brown’s piece ignores a lot of the great stuff that has come out of the video game industry here in Canada. Torontoist has a really good rebuttal to Brown that among other things points out how Toronto had an indie scene before Ubisoft came to town:

In Toronto, tax incentives make sense; our local industry is fledgling relative to those in Vancouver and Montreal. In fact, Ontario has smartly focused on supporting the industry here with tax breaks and grants and has tangible results to show for it: Toronto is now a rising star in the games world. However, what convinced Ontario to invest? It’d be hard to argue that the success of Vancouver and Montreal wasn’t a major factor. So, while Brown would like a Canadian industry of our “own,” the presence of one was undoubtedly catalyzed by the draw of foreign corporations, which brought along their knowledgebase and visibility.

Brown also called game developers slobs (essentially) which is just insulting and has no merit. Village Gamer has a good response to that:

These people – to whom Mr. Brown referred to as “code monkeys” and “grunts” are my friends, and it is these “grunts” who help to bring entire worlds to life, whether it is in an adventure – and sneakily educational – game like Assassin’s Creed, or an educational game that is sneakily fun like those coming out of Vivity Labs’ Fit Brains – all of them are built on top of a foundation built from computer code. Even the military relies on “grunts” to get things done, and done well, Mr. Brown.

What’s more is that Brown assumes that people who are working in the games industry now will inevitably lose their jobs when tax breaks get better elsewhere. I don’t think that’s true. In manufacturing, jobs do go elsewhere (look at NAFTA), but when it comes to the culture industry we can also create more culture no matter how many companies are here (unlike cars).

A lot of the companies that have produced best-selling games here have gotten a helping hand from the government but they have also helped the industry throughout Canada by bringing and attracting talent. People who wanted to get into game production use to leave the country but now, thanks to the tax incentives companies are coming here to access that talent.

If the big companies leave we’ll still have talent that can produce top-quality content because they’ll have the know-how and the connections to it.

The game industry is helping to retain (and attract) culture-producing people to Canada and that’s good for everyone.

Canadian Companies and US Incorporation

For many start-ups in Canada being acquired by a larger company is a sound exit strategy, however that process can be complicated by ownership structures. Entrepreneur Carl Mercier has an excellent blog post on how to structure your Canadian company to be easily acquired by an American company. It seems almost too simple to believe.

Karabunga owned all the IP, the Defensio name, the trademarks, the code and the servers (in our case, EC2). Karabunga owned and controlled all the value.

QC-inc was a simple consulting firm that had only one client: Karabunga. Our employees, office, dev computers, ping-pong table and our infamous Dev1 development server all belonged to QC-inc. The idea is to keep both companies as independent as possible. If QC-inc went out of business for whatever reason, it would not have impacted Karabunga in any way (aside from losing all the employees). QC-inc also obeyed Quebec’s French-language laws such as Bill 101. Hopefully you don’t have that problem where you live.

Karabunga is the company we sold to Websense and the employees became Websense employees. I later dismantled QC-inc since it lost its only client and no longer had a purpose.

Read the full rundown on being a Canadian company incorporating in the states.

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