Skip to main content

The Ontario Interactive Digital Media Tax Credit (OIDMTC) was unveiled more than a decade ago as an economic development effort targeted at the fledgling video game industry. For years the credit was largely unused, but that changed in the mid-2000s when the government began boosting the value. Since then a flood of claims has poured in.Petai Jantrapoon

As Ontario reviews a provincial tax credit aimed at luring video game producers, a number of groups are lobbying to hang on to, or redirect, the credit which they consider a vital part of Ontario's high-tech economy. Others argue it has turned into a costly measure tapped by many other companies including financial institutions, manufacturers and media outlets.

The Ontario Interactive Digital Media Tax Credit (OIDMTC) was unveiled more than a decade ago as an economic development effort targeted at the fledgling video game industry. For years the credit was largely unused, but that changed in the mid-2000s when the government began boosting the value. Since then a flood of claims has poured in.

In 2009, tax credits amounted to $9.6-million. That jumped to $38.3-million the next year, and then soared to $75.1-million in 2012-2013.

In the fall 2014 economic update, the finance ministry called for a review of "the scope and parameters of this credit" in part because it had "grown at an unsustainable rate."

The issue centres largely around how government defines "interactive digital media", or IDM, and whether that work can be used to claim the credit. The challenge for the government is that IDM serves as a kind of catch-all phrase for almost anything you can do on a computing device far beyond gaming. Former tax professionals say major corporations like banks, insurance companies, news organizations (papers), manufacturers, marketing firms and others have increasingly found legal ways to claim a growing share of the credit for their work developing apps and other digital projects.

"As the [IDM] industry has grown and evolved, the broad eligibility of the OIDMTC has limited the ability of the credit to target innovative products," a spokesperson for the Ministry of Tourism, Culture and Sport said in an e-mailed statement.

"Moving forward, we will continue working with our IDM [interactive digital media] partners to ensure that the OIDMTC meets industry needs and provides a strong return on investment for our province."

The prospect that the government could rein in the credit by changing the eligibility criteria has some observers worried.

"What we're concerned about is that the definition may be narrowed and inadvertently exclude certain categories of interactive media," said Peter Miller, chair of the not-for-profit trade group Interactive Ontario. His organization has hosted several town halls across Ontario in recent weeks to encourage its 300-strong membership of interactive digital media companies to lobby the government to keep the OIDMTC largely unchanged.

"Other provinces have limited their credits to gaming … that won't work for Ontario," Mr. Miller said, noting that Quebec and British Columbia have games-only tax credits but argues only a third of the Ontario companies currently eligible for the credit are purely game companies.

Albert Lai, CEO and co-founder of London, Ont.'s Big Viking Games says the tax credit was enormously helpful in growing his business. He argues that OIDMTC eligibility should be limited to small and medium Canadian gaming companies to help spur homegrown talent and jobs.

"The film industry has been built up over time through the tax credits. But Ontario, Toronto, will never be Hollywood. For the lack of the better analogy [the province] has a huge opportunity to be the Hollywood of the 21st century – which is games," says Mr. Lai.

Provincial figures suggest projects that applied for OIDMTC credits involved in excess of $233-million of annual spending, whereas gaming represents just $134-million.

Even if the government decides not to change the kind of content or companies eligible for the credit, observers warn ratcheting back the OIDMTC's rebate rate could hurt the province's economy.

"We would encourage the government to be careful. It would be short sighted just to reduce the credit," said Tracey L. Jennings, a partner with PricewaterhouseCoopers LLP and the firm's leader of GTA tax technology, communications and media. In her view, Ontario tax policies contribute to and are a part of maintaining Canada's economic competitiveness and preserving the country's ability to attract and build global businesses.

"This is a program that creates jobs for young people," said Gerald Pisarzowski, vice-president of business development for the Greater Toronto Marketing Alliance. He points to the arrival of major game makers Ubisoft and Gameloft as wins for the incentive. He believes the credit needs to be maintained, if only to keep the province on a level playing field against other jurisdictions vying to attract foreign direct investment.

The Globe and Mail is a recipient of the credit. Another media company, Postmedia Network Canada Corp., has also received the credit.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe