Push for gambling tax breaks to attract next-level investments

Hopes are high that “scaling up” a video game tax break — similar to the well-known film and TV credits — will lead to an influx of new investment.

The film credit — a 32 percent tax deduction known as Section 481 and in effect since 1987 — was responsible for attracting big-budget productions such as brave heartto Irland.

The Treasury is still fine-tuning the loan to ensure it complies with EU state aid rules. To qualify, producers must demonstrate that the games are “culturally relevant” to Ireland and Europe, a test administered by the Minister for Culture.

Patrick O’Donnell, video games analyst at stockbroker Goodbody, said the existing relief for digital games – known as Section 481a – could attract studios like Britain’s Sumo Digital.

It could also attract new investment from top firms such as Singaporean Virtuos, who already operate a studio, Black Shamrock, in Dublin.

Virtuos recently announced its expansion into Malaysia, France and Canada, all of which have game maker tax credits.

“It could be the starting point to build some level of consolidation. The Irish market is quite nascent now,” said Mr O’Donnell.

“I think sumo is definitely one that stands out for me as a potential candidate. They have already settled in other areas on this basis. And when that core forms and larger studios come here, you tend to see a waterfall effect.”

Many global game makers including FIFA Manufacturer EA and call of Duty Manufacturers, Activision Blizzard, have already settled here, but mainly to do backend work like legal, customer service, or testing that would not qualify for recognition.

The Section 481a relief allows for a 32 percent corporate income tax credit on 80 percent of the cost of making a game, up to a maximum of €25 million.

“That could be an issue for really big games, so it could mean that the size of publishers that come here could be mid-tier developers rather than your EAs and Activisions,” Mr O’Donnell said.

“It depends a lot over time on how the government responds to the momentum around some of the companies that are coming here – are they scaling it?”

The government certainly hopes that the current loan will lead to new investments.

It has poured €1.9m into a digital gaming hub in Strandhill, Co Sligo. And IDA-backed Riot Games, makers of League of Legendshas recently invested €18.5 million in a new remote eSports broadcast center in Swords, Co. Dublin.

Meanwhile, film producers are nervous that the government has yet to commit to renewing its 32 percent film credit, which EU state aid rules require it to review every five years.

Screen Producers Ireland board member James Hickey said he was “optimistic” the relief would be extended and that the industry would be given a long-awaited “Netflix levy”.

A recent study by consultancy Indecon found that a 3-part content delivery could bring in the industry €25m per year, mobilizing up to €100m in production activities for Ireland-targeted content.

Twelve European Union countries are already imposing financial obligations
TV groups to produce local content.