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)

12 thoughts on “TIGA’s updated games tax proposals make for interesting reading”

  1. Tom should be knighted as Courageous Captain Galahad for fighting mighty empires of Rupert Murdoch andthe boys in high places at home and abroad.
    If only he had the power of General George Washington,Freemason who defeated the mighty ritish empire and whose portrait hangs behind Obamas chair in white house.
    Or for that matter Tom was King Richard the Lion Heart or he had the backing of Queen Elizabeth the first to succeed in his noble crusade against forces unknown who have only allegiance to money regardless of ethics or morality of the busines or trade.Churches should pray for Tom Watson in his hour of need.

  2. I agree with your sentiments. As an ex-games developers myself, however, I think it’s too late. The stable doors are banging back and forth in the breeze while the horses are long since gone…

    The games industry is undergoing another of its frequent upheavals. (IT-based industries are in a constant state of transition, which is not something governments are particularly good at dealing with). Computers gave us Desktop Publishing and even Desktop Video. Now, they’re giving us Desktop Game Development. Products like Unity (www.unity3d.com) and its peers have dramatically reduced the barriers to entry for independents. Anyone can make a game. And many are.

    The iPhone and its imitators have effectively blown the doors off the truck of game development. They’ve levelled the playing field somewhat, so that a couple of blokes in a shed can make a tidy sum from a game just as easily as a vast team of developers in Canada. And the former will be a lot more efficient at it too.

    Furthermore, developers are starting to adopt the Hollywood model more frequently, whereby staff are hired as freelancers, on an as-needed basis, instead of kept around all year, even if they spend a sizeable chunk of it twiddling their thumbs waiting for something to do. (Or ‘crunching’ 80+ hour weeks to get the game released in time because the UK has a truly terrible management culture that consistently rewards failure.)

    Finally, it was during Thatcher’s tenure that the concept of “UK Plc.” was invented. New Labour didn’t do anything to change this concept, so the upshot is that many people increasingly view the government as just that: a business—albeit one with a finger in many a monopoly. The results are inevitable: if YOU and your Right Honourable friends insist that you’re going to run the country as a business, you have no right to expect your “customers” (i.e. taxpayers) to treat the government as anything other than a corporate management team.

    Neither New Labour, nor their successors or immediate predecessors, have done much to inspire confidence in that management team. Out with the old, in with the… not particularly new. Corruption has become a running joke in every satirical panel show. Petty bickering and football-grade ‘debates’ that essentially boil down to NIH Syndrome abound. Genuinely idiotic decisions made with absolutely no regard to basic physics or, indeed, any form of research whatsoever are rife. And all this is crippling the UK. Businesses are being crushed by such gargantuan volumes of red tape and bureaucracy that even the Italians—who even invented *custom paper sizes* just for some of their forms—point and laugh.

    And don’t get me started on the sheer, ludicrous cost of doing *anything* in the UK today. Seriously: how the hell does it cost *three times* more to build a pretty standard TGV line through rolling countryside instead of one that includes the longest tunnel on Earth through the Swiss Alps? Fix THAT, and many other problems besetting the UK will go.

    Until early last year, I was a resident of Kent. I grew up in SE London and lived there, or very near there, for most of my life, so I feel I have every right to be bitter about that region’s chronically shabby treatment by both Labour and the Tories, so I decided to leave the UK for another country—another ‘business’—to support with my hard-earned cash. I now live not far from Rome, where a new tube extension is being built for substantially less than half a billion Euros. Beat that, Jubilee Line.

    If you want my tax money, you’ll have to give me a damned good reason to come back. Guaranteeing that you won’t be pouring away my money on umpteen consultants (what the hell do you pay all those civil servants for?), or suffering repeated knee-jerk reactions to newspapers and other publications read by a tiny, tiny minority of the public would be a good start.

    It’d also be nice to see someone in charge of each department who (a) wants to be there, and (b) has a bloody clue what it does all day.

  3. Oh yes: a Land Value Tax system of some sort would also be nice, if you could manage it. And I’ll have that partridge in the pear tree you’ve got displayed in your shop window too.

  4. Well put Tom.

    The government goes on about how it is looking for industry and the privet sector the bring us out of the recession and to lower unemployment.

    But surly it is help like these tax cuts that will allow that to happen. Tax relief targeted in areas where it will pay for itself – and not take long for the return to happen.

    Just who is advising the government on this? Surly not someone who has a grasp and understanding of the economy of the games industry and the huge amounts of money these high end products bring in to the treasury.

    I also don’t buy the argument that it would complicate the tax system. Just copy and paste the model used for the film industry. The two sectors are so similar.

    Thank you for your hard work in supporting the industry I love, Tom. There are too few MP’s who appreciate games. Hopefully in 5-10 years things will change.

  5. Thanks Tom for all you have done on this, as a gamer myself, I wish the unique talents of tue UK was better supported inlight of the overseas govt support

  6. Can’t get away from the niggling feeling that we should all be concentrating on getting things right in the real world as opposed to cyber-space……

  7. As someone who in September will be beginning a four year course at University in Games Design it pleases me to see that Politicians are supporting the industry I want my future to be in.

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