Do free games on platforms like Epic turn into tax write-offs for the corporation?
I was thinking about how many free games get "sold" on these gaming platforms and was wondering if these became tax write-offs as "business expenses" or "loss of potential profit" in a corporate tax setting. If so I think this is a very big loop hole that will have greater and greater issues in the gaming space going forward. I also think that would be a slap in the face to developers as they would really be the only ones losing out from a system like this.
I originally was thinking about why I get invoices for "purchasing" a free game through the epic launcher and felt that it was just a waste of time/effort. But if there's a paper trail I believe the company can write it off as a loss. How many people though just grab any and every free game because "why not?". However the more companies that are able to use tax loop holes to decrease their owed taxes at the end of the year, the more the government has to take from everyday people.
Does anyone know if there is any way to tell if a company is using their "free games" as a way to dodge corporate taxes?
Posted Dec 16, 2022, 7:45 PM UTC
It might be, but either way I think it's mostly just a way for Epic to get people to build a library of games in their storefront which makes a lot of people more open to continue using it because now they've got a good 20-30 games on it.
That and buying as many exclusives over Steam as they can get their hands on.
yes. I definitely understand that is what they're trying to do. It's similar to the idea of Opportunity Cost. They're choosing to forgo the current potential profit of making sales on those free games in order to create an environment where consumers are more likely to spend money on their platform in the future. However if they're allowed to write off that cost on their bottom line at the end of the year, it's a win win for the corporation and loss for the other parties involved.
I'm not asking about what the reasoning behind them giving away free games. I'm asking literally if they can write off those free game giveaways on their taxes. That would be my problem with the example situation. I fully understand why they are giving the games away.
How do you think a write off works, that makes giving something away a win win for the company?
Because they potentially could get both the increased exposure to their platform while mitigating the lost revenue of those who were going to buy the game but now don't have to. They would essentially negate that lost revenue with the idea that giving a copy of a game away on a digital platform where the product cost has already been paid for is somehow them losing money when it's really them just giving away something that nobody necessarily would have bought anyways and then getting to deduct taxes when they really haven't spent any money at all.
But I don't know how/if they could do a write off on something like a purely digital asset. But I would wager that with the amount of money that tech companies donate to political campaigns that they would somehow work digital asset losses into being able to be written off and I don't know how far that would extend. That's why I'm posing the question to find out how if anyone really knows how it works.
All they can deduct is what it actually costs them. If it cost them zero? Then zero is all they can "write off". There is no digital asset losses deductions.