TIGA’s updated games tax proposals make for interesting reading

TIGA, the trade association for the video games industry has released an updated second edition to their previous publication in relation to proposals for tax relief on the industry following on from their original submission to the Labour government in 2009.

I campaigned hard within the last government for the introduction of tax relief for the UK video games industry. It’s a sector that we can be truly proud of; that showcases the creative talents and inventiveness of our nation on a global stage.

Britain has for many years consistently occupied the 3rd place spot in world for video games; understandably behind the US and Japan.

However in 2006 this changed when spurred on by considerable tax reliefs and attracting inward investment Canada rose dramatically up the rankings.

We weren’t quick enough to react in the UK to the changing global landscape of the video games industry but I’m glad that finally in 2010 ministers acknowledged the problem and the importance this sector represents to the UK economy by bringing forth the legislation in March 2010 for the introduction of a Games Tax Relief.

Sadly, this was one of the casualties of George Osborne’s first budget when the coalition government came to power.

I have to admit that despite all the horrific measures introduced that day; that announcement really hurt. Not because I’d been working on its introduction for so long but because it was quite clearly representative of the short term false economic approach that has come to typify the coalition government.

Despite the global financial crisis that has plunged much of the world’s economies into recession over the past couple of years; between July 2008 and September 2010 global sales of video games increased 16% bucking the trend. As a country with a long heritage of producing some of the most iconic video games you might have expected that amongst all the gloom of the recession in other sectors that the UK games industry would have provided a glimpse of light but it didn’t.

In the same period, the head count of games developers in the UK industry fell 9%.

Our video games industry represents a sector of the economy that has the true potential to shine, even in difficult economic times. We’re not lacking the developers, we produce some of the best and brightest in the world but in the global economy our risk of losing these highly trained professionals, not to mention their income tax receipts is high.

I’m saddened at the approach the coalition government seems to be continuing to take to the industry.

David Gauke, Exchequer Secretary to the Treasury reiterated the Government’s view of tax relief for the UK games industry by saying:

“Games Tax Relief would not be additional to the UK economy; that it would displace investment from more productive economic sectors; that skilled developers who lost their jobs in the games industry would find work elsewhere and so Games Tax Relief was unnecessary; that Games Tax Relief was economically inefficient; that Games Tax Relief would complicate the tax system; and that Games Tax Relief represented poor value for money.”

I couldn’t disagree with him more on his comments.

He may well be right about skilled developers losing their jobs not ending up with the rising number of those unemployed; but neither are they likely to be getting jobs in other sectors in the UK or running their local libraries for Dave’s ‘Big Society’ when they’ve sacked the librarians. I’d hazard a good guess they’ll be investigating applying for a Canadian work permit and checking out apartments in downtown Montreal.

This is the real crux of the problem for the UK economy. We seriously risk giving away a sector and a highly skilled workforce that we’ve been instrumental in creating and nurturing for decades for the same sort of short-sightedness and not adapting to the global changes.

It happened to France in the middle of the last decade. France lost 60% of its developers to Canada by 2005. Since then, the French Government has introduced tax relief for their industry and it’s been successful in bringing back jobs but the industry still hasn’t recovered its position and that’s not what we should allow to happen here.

Sadly though, it’s already happening. UK Video Games producers lost 23% of their developers to foreign countries in 2009, 73% of those went to Canada.

If we’re to stop this brain-drain then the industry needs incentives right now.

David Gauke claims a tax relief system would complicate the tax system. We’re usually told red tape is the scourge of industry but here we have an industry calling for it because they recognise the benefits to the UK sector and the economy as a whole, not to mention it has seemed to work quite well in the film industry which has not had it’s tax relief abolished.

The Conservative’s were happy to crow about how reforms to non-domiciled tax status would drive some of the best and the brightest from the country, but in abolishing the introduction of a Games Tax Relief they are driving some of our brightest and best developers abroad and undermining an industry that actually does create real wealth for our economy.

There has never been a more important time than now to introduce a Games Tax Relief system in the UK. While our competitors from Canada, the US, Nordic countries, France, Germany and South Korea press ahead and hoover up our talent; our government does nothing but watch the studios close down and an industry fall into decline.

You can read the full 85 page report from TIGA here. (PDF)

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