According to an article released yesterday by the New York Times, video game companies, due to their straddling of the lines between the software development and entertainment industries, have a bevy of tax breaks at their disposal. Tax breaks that they take advantage of, perhaps enough so to warrant the ire of the observing American people.
The prime suspect here seems to be Electronic Arts, who has spent $6 billion on creating software over the last 5 years, only to immediately deduct it due to a 1969 edit in the tax code that allows companies to write off software development in addition to lab based research and development.
Dodgier still, the company has over 50 subsidiaries in low tax countries, such as Singapore and Bermuda, and has more than $1.3 billion in offshore profits that won’t be taxed unless brought into America.
Electronic Arts is quick to defend itself though, saying “E.A. is a global company with a majority of our customers and roughly 50 percent of our revenue generated outside of the United States,” an EA spokesperson said. “Naturally we hire, build facilities, copyright our trademarks, invest and pay taxes in countries outside of the U.S.”
Of course, it would be silly to tell you that EA is the only one partaking in this particular brand of cost cutting measure. EA is just so damned big that they happen to be dealing in billions of dollars, and when that much money is involved people tend to take notice.
Now where does this place EA in the public’s opinion? This is all technically legal, and an EA rep is quoted as saying that to not take advantage of the tax breaks would be like a customer “insisting on paying full price during a store sale”, and the man’s got a point.
Would you engage is some shady, yet completely legal, business practices to save an enormous amount of money? Or should integrity and transparency override the confidence that a couple billion dollars can instill in your investors? Or, perhaps, is this more an issue with how the American tax code works, instead of the companies that are governed by it?
I like their defense. While sure it makes sense, a store sale is NOT an exploitation of the mercantile system in the same way that their tax write offs are taking advantage of the tax code.
mo money mo problems.