Video game tax credits have been withdrawn in the Canadian province of Alberta after just one year.

Tax credits - also known as tax breaks - have existed in the game industry for many years, but have in recent months come under increasing scrutiny from those that deem that they are sometimes equatable to tax avoidance.

In Alberta, the New Democratic Party rolled out its 'Digital Media Tax Credit' scheme local game developers in 2019, writes CBC. However, the NDP lost the 2019 the provincial general election, handing over power to the United Conservative Party.

Then late last week the UCP revealed its new budget, which eliminates the tax credit system, replacing it with general tax reductions that aim to benefit all industries equally.

"In contrast to targeted tax credits, the corporate tax rate reductions and enhanced CCA rates create a competitive environment for all industries to grow and succeed," the budget document read.

But game companies in the province that were gearing up to expand - apparently empowered by the tax credits - are less convinced by the decision to remove the credits system.

Trent Oster, CEO of local developer Beamdog and former co-founder of the iconic studio BioWare told CNN he felt "betrayed". Beamdog was reported to be in the process of planning an expansion of its team from 50 staff to 100. Beamdog last developed and published 2018's RPG Neverwinter Nights: Enhanced Edition (pictured).

"When the NDP announced after a long and slow consultation process with us that there was going to be an interactive digital media tax credit to level the playing field with a bunch of other provinces, which have honestly still superior tax credits, I was really hopeful," Oster offered.

Meanwhile, game tech outfit Improbable said that while it would remain headquartered in the province, the removal of tax credits means that it will have to seriously consider where it puts future investment.

Video game tax breaks have a long history in Canada, with the provinces of British Columbia, Manitoba, Nova Scotia, Ontario and Quebec having systems in place broadly comparable to the terminated Alberta model. In the early years so of those scheme had tremendous impact.

Around a decade ago, if you wrote about the game industry, you inevitably wrote about Canada emerging as a powerful talent 'brain drain' that threatened to undermine other nation's game industries. In 2010, as the UK was in the thick of the battle to establish tax credits, it was a point of genuine concern.

In the UK, the EU Commission officially approved a tax breaks scheme on March 27th 2014. Since, the scheme has been argued to have significantly bolstered the security, potential and standing of the UK game industry, which contributes billions in GVA to the UK economy, and serves as a globally pronominal game industry hub.

More recently, however, tax watchdog TaxWatch focused attention on game companies' employment of the UK tax credits scheme. The picture is a complicated one. Some companies, it was felt, were too big to be using the scheme, which was pitched as serving small to medium companies at its inception. Others, some believed, did not reasonably or actually meet the 'culturally British test', which decides if games are eligible for UK tax credits. It then emerged just four gaming companies companies were claiming close to half of all video game tax relief.

The counterpoint was made that equating game tax relief to tax avoidance was too shortsighted. Many put forward the case that the long terms gains are simply better for the UK economy, workforce and, of course, wider game industry.

The arguments for tax credits are varied and intricate, but this tweet by Sheridans' games finance lawyer Time Davis sums them up thoroughly.

There's been a lot of chatter this afternoon following the @gdngames article on VGTR. I have set out some thoughts on why I think VGTR is great, and why restricting the cultural test would be wrong. @uk_ie #gamedev #indiedev #ukgamesindustry #VGTR pic.twitter.com/g7jom0eYTL

— Tim Repa-Davies (@dontfeartherepa) October 2, 2019

Some argue that looking thoroughly at tax break schemes covering games dev or sectors entirely unrelated, the approach does not guarantee a lift in jobs or a boost to the economy. Equally, however, the BFI, which runs the UK video game tax relief and cultural test, last year published a report claiming that £4 was generated from every £1 invested through the scheme.

Tax relief for a medium as controversial and misunderstood as games will always likely come under scrutiny, and perhaps generate sensational headlines in the mainstream press. Compelling arguments exist for and against the schemes, but they will never be far from the conversation about the merits of an industry that creates video games. And they continue to buoy up numerous game companies large and small.