Game companies receive flabbergasting tax breaks

This is a bit older, but worth revisiting. David Kociewski recently wrote a column for the New York Times focusing on how Electronic Arts used savvy accounting practices to reduce the amount they owe the federal government by millions, by combining the various breaks available to companies in different industries.

Because video game makers straddle the lines between software development, the entertainment industry and online retailing, they can combine tax breaks in ways that companies like Netflix and Adobe cannot. Video game developers receive such a rich assortment of incentives that even oil companies have questioned why the government should subsidize such a mature and profitable industry whose main contribution is to create amusing and sometimes antisocial entertainment.

For example, Electronic Arts of Redwood City, Calif., shipped more than two million copies of Dead Space 2 in the game’s first week on the market this year. It shows a total of $1.2 billion in global profits the last five years using an accounting method that management says captures its operating profits.

-Drew Millard

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