Gees bloody easy to go bankrupt from 5% of revenue. Say you built a commercial building and you bought 10 million dollars worth of material and paid 10 million dollars for labour to put in up and the land cost you a further 10 million dollars. Now your plane to sell that building for fifty million dollars and make 20 million dollars profit didn't pan out. You are following me, I hope I didn't make it to complex for you so far? Now people think you building sucks and only want to pay you thirty million dollars for it. You got that part ie no matter what you are asking or what you hoped for you will only break even. You got it, are your sure, I mean by now you should be able to guess exactly where there is going with out me finishing it but I suppose if your silly enough to ask the question, than an answer must follow, well, not always. So you thought no harm no foul, you are going to break even but wait, the person that designed the building wanted 5% of revenue for the design and 5% of thirty million dollars is 1.4 million dollars and you don't have the money but they are demanding it. You not what happens now, yep that last 5% sends you 'BANKRUPT', I mean like duhh, homer. Yep 1% can send you bankrupt if that 1% is more than you have to pay your debts, especially when it is 1% of revenue and not profit. 5% of profits of course is very unlikely to send you bankrupt but 5% of revenue most certainly can do it every time, especially when margins end up being tight or as sometimes is the case in gaming non-existent.
You see, they do not in fiscal reality want 5% of revenue, they want to apply a 5% tax on all investments costs of development and publishing. They want a 5% tax on all project expenditures. Now I know that will also go over your head, so I will explain it. The whole idea for the producer is that revenue will pay the full cost of development and of course generate some profit on the side, so the development cost is a wash in revenue, with profit being the focus but the game engine people want to charge a 5% tax on development costs not on profits.