Ireland presses start button on video games tax credit

Underdog no more: companies already keen to hire in response to budget move

A passenger on a Beijing train plays pandemic games hit Animal Crossing: New Horizons on a Nintendo Switch. Photograph: VCG via Getty

A passenger on a Beijing train plays pandemic games hit Animal Crossing: New Horizons on a Nintendo Switch. Photograph: VCG via Getty

 

A quarter-century after Québec introduced an explosively successful tax incentive for video-game developers, the Irish Government has hit the start button – pending state aid approval from Europe – on a digital gaming tax credit for the Republic. Its message to the industry: get over here and make your video games.

If you do, you can have 32 per cent corporation tax relief on design, production and testing expenditure of €100,000-€25 million per project.

It is probably no coincidence that the man to unveil this measure, Paschal Donohoe, is the first Irish Minister for Finance to have grown up with computer games as part of the cultural conversation.

The industry would nevertheless be too colossal and too fast-growing now for any self-respecting government to ignore, no matter their generation – one recent estimate from consulting giant Accenture suggested its global annual revenues exceed $300 billion (€260 billion), higher than the film and music industries combined.

“A definite show of intent” is how Imirt, the trade association representing the Irish video games industry (and also, delightfully, makers of board games), describes Donohoe’s confirmation of the credit in Budget 2022, which came 12 months after he first flagged that one was being explored.

Imirt began an official dialogue with the Department of Finance and also the Department of Culture in February 2020, shortly before a renewed surge in video game consumption was triggered by pandemic lockdowns. Its members, who range from companies with dozens of employees to individuals working as part-time developers, have up to now found financial support or recognition from the State frustratingly elusive.

“We want to nurture the talent that is already here and make sure they get the support they need to not only create the game they’re working on now, but the next game and the next game,” says Imirt board member Craig Stephens, who runs video games communications consultancy Kartridge.

Québec’s “very, very forward thinking” credit has, over the decades, lured some Irish developers to Montreal, the Canadian province’s creative epicentre. Several other countries – including France, Germany and the UK –have since introduced tax credits , making it even more critical for the fledgling industry here not to lose any more of its people.

Skills transfer

The tax credit is also “really good news” because it will make the industry attractive to students and people eyeing the potential of the industry from a related field: animation is one that is often mentioned as having transferable skills.

“The other side of things is attracting people from abroad. If we have tax credits that are similar or better than other nations that they might be considering, they’ll say ‘Ireland have got a good set-up there, loads of support from the Government and a great community – we’re getting involved in that’.”

The “encouraging” move will boost the reputation of the Irish industry, agrees Ellen Cunningham, Imirt board member and lead game writer at Dublin-based indie studio Gambrinous. There has been an immediate impact too: “A lot of people are considering additional hires in their companies already, based on seeing that this tax credit is coming in.”

This is notable given that key details remain unknown. While the exact criteria for qualifying expenses is expected to emerge in the Finance Bill this Friday, the European Commission-dependent commencement date will remain hazier for longer, with some time during 2022 the best guess for now.

For sure, the 32 per cent rate – the same rate that applies under the section 481 film and television relief scheme – is not just competitive, but globally appealing, beating the UK (25 per cent) and France (30 per cent).

“We’re looking at what precisely falls under the 32 per cent. You can claim your salary, but what other expenses? We want to make sure everything appropriate is included in the legislation,” says Stephens.

From Imirt’s initial conversations with the Department of Finance, including one that took place last week, it “all sounds positive”, he says, though the department has apparently been keen to stress that this is just the beginning and “nothing is perfect to start off with” – a feature of tax credits that will be familiar to section 481 applicants.

Given that the Irish games industry, which employs about 2,000 people, is no stranger to exploitative practices such as routine unpaid overtime and precarious contracts, several TDs have also highlighted a call by the Game Workers Unite, a branch of the Financial Services Union, for the tax credit’s undertaking of quality employment requirement to be watched like a hawk.

The prize for getting it right could be considerable. Because the scale of the video games industry is “absolutely astronomical”, as Stephens puts it, if the Republic was even able to capture 1 per cent of the global pot, that would be a $3 billion revenue cut.

Cultural awareness

The figures make it all the more remarkable that awareness of video games has been “nowhere near as high” as that enjoyed by its entertainment cousins, in his view. “More people than not play video games, if you include mobile gaming and things like that, but it’s always seen as a bit of an underdog to film and TV and music,” he says.

Indeed, “the underdog thing” was, for a long time, “actually sort of celebrated and enjoyed” within the industry, which played up its “small bedroom programmer” origins and liked to view itself as separate from the mainstream.

The pandemic has seen a shift in perceptions as well as units, however: Nintendo’s Animal Crossing: New Horizons, which had the fortune to be released in mid-March 2020, “sold by the bucketload” last year as Nintendo Switch users of all ages socialised with each other through “a colourful, relaxing, cosy game – really wholesome stuff”.

Cunningham, who is also a designer, believes each generation’s growing tech literacy has spurred more people to discover new – or, at least, newer – forms of storytelling and art in games. It is not just an economic phenomenon: “Games are being recognised now as the cultural products they are.”

For the Irish sector vying to get to the next level amid this global boom, Donohoe’s intervention makes it game on.

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