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Aussie tax play a next-level threat for Kiwis’ games

The $267 million games industry is worried that tax incentives across the Tasman will cost them their best talent. Daniel Smith reports.

Derek Bradley is a world-builder. The chief executive of Wellington game studio A44, does not discuss his work in terms of consoles or gameplay, but in the meticulous environments his studio creates.

But the world of this local game studio is under threat.

Unlike the games he creates, the threat is not dragons, wizards, or trolls, but Australian tax incentives.

The Australian government is offering a 30 per cent federal tax offset for the video game industry. Businesses that set up in the Melbourne CBD can get an extra 10 per cent on top.

This means that every time a video game company worth over $500,000 spends a dollar in Melbourne, they get 40 cents back.

That discourages global companies from investing in New Zealand, when there is a much better deal next door, Bradley says.

‘‘It is just a simple risk calculation in an industry that is inherently high-risk. If you can take 40 per cent of the risk away it is an easier sell for investors,’’ he says.

The move will also give Australian game studios the ability to offer much higher salaries, which could see the local talent pulled out of the country at a rapid pace.

‘‘It will create a vicious cycle. If Australia is able to offer more money, they will attract more talent, making their creative endeavours more successful, which in turn will entice more Kiwis over the ditch.’’

Chelsea Rapp, chairwoman of the New Zealand Game Developers Association, says tax incentives have long been an issue, but now even more so. ‘‘Pretty much every gaming industry in the world operates through some kind of tax incentive. Up until now those programmes didn’t affect us because they were so far away.

‘‘But with Australia it is different. We are basically one labour market and the difference in wages is so high. If any worker has a choice they are going to go to Australia,’’ Rapp says.

A junior developer in New Zealand can expect to earn between $45,000 and $65,000, while in Australia starting salaries can be as high as A$90,000, Rapp says.

Last year the New Zealand games industry had revenue of $267 million.

But Rapp is calling on the Government to match the Australian tax incentive, if the industry is to survive.

‘‘We really need to level the playing field. If we don’t offer this incentive then Australia is simply going to drain the talent from us,’’ she says.

Grinding Gear Games, a west Auckland game development company employing 160 staff, sold an 80 per cent stake in the business to Chinese gaming giant Tencent in 2018.

But despite the success of the studio, chief executive Chris Wilson says there are already whispers among his staff about opportunities overseas.

‘‘The thing that is keeping them here is entirely loyalty at this stage, because the correct financial decision is to move to Australia and get the big money.

That is a big concern for us.’’

For Wilson, the economics of a subsidy are a no-brainer. The cost to the taxpayer for an industry-wide subsidy would be covered by the tax paid by Grinding Gear Games, he says.

Though Grinding Gear will survive the changes, many smaller companies might fail.

‘‘We have resources, we have Tencent’s backing, we will find a way. But many companies in New Zealand will not. It will certainly disrupt the tax revenue the games industry is generating by far more than a subsidy would.’’

Digital Economy and

Communications Minister David Clark says government aid to the games industry is under ‘‘active consideration’’.

But Stephen Knightly, chief operating officer of Auckland gaming studio Rocketwerkz, says consideration is not good enough when Australian companies are already poaching local talent.

‘‘Given borders are closed, the only place that Australia can really get their talent is from New Zealand.’’

Sam Ramlu, managing director of Method Digital and Wanderer studios, an Auckland studio working on a virtual

reality game with funding from Sony, says it is difficult to find a reason to stay.

‘‘What is the incentive to stay here? Apart from the fact that personally I want to grow the industry here, I want to be creating opportunities here. But it is hard to ignore that 40 per cent difference especially now it is just across the ditch,’’ she says.

It is also difficult to stay when the hard work of the industry is not properly recognised.

‘‘People are still surprised there is a games industry in New Zealand.

‘‘Yet people are thriving and studios are doing incredible things that have been picked up by international companies.

‘‘It is almost that despite the fact that it is not funded people have been making this amazing stuff. Imagine if it was funded what that would be adding to our economy.’’

For Bradley, one issue is ensuring a New Zealand voice is heard on the world stage.

‘‘Video games are the next battlefield of globalised culture. Do we want other countries to be the dominating voice? Because that is what will happen if New Zealand does not support their own industry.’’

‘Video games are the next battlefield of globalised culture. Do we want other countries to be the dominating voice?’ DEREK BRADLEY OF WELLINGTON GAME STUDIO A44

NEWS

en-nz

2021-10-24T07:00:00.0000000Z

2021-10-24T07:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/281732682689308

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