UK Video Game Tax Cuts Sabotaged?

ninjacheeseburger writes "Develop recently published an article claiming that the UK government was put under pressure by one of the biggest game companies in the world to cancel planned tax breaks for video game developers. This company had apparently viewed game tax relief as a measure that would have given the UK an unfair advantage over other nations."

Comments

disadvantage..?

[danny_lehman]

really?.. they wouldnt be the first country to put tax breaks in for creative sectors.. seems like the Other countries already have the unfair advantage over the UK.. this would be more like leveling the field.

Re:Doesn't say who the game company is

[Kitkoan]

Yes, that is another guess but so far its all just guesses. And I would question if it really is Activision since they are owned by Vivendi which is based in France so they might have something to gain with a closer tax break zone. EA on the other hand is only a US company so would have more to lose in theory.

And the other half of the story...

[Hadlock]

The economy is bankrupting the UK. Fark puts it succinctly: "Facing a massive budget deficit, the UK to cut welfare, increase the VAT to 20 percent, and impose a new tax on anyone who brings one of those damn vuvuzelas back from the World Cup". Chancellor George Osborne is doing what all countries should do in that situation but are afraid to do, due to the unlikelihood of reelection. The country is damn near bankruptcy, the whole European continent is over-leveraged on debt and Britain is doing their best to make an example by balancing their budget. Tax handouts to the entertainment industry don't help balance the budget. Insert snarky comment about US legislators growing some balls and balancing our budget here...

Here's some more info on the subject:

from the NYT http://www.nytimes.com/2010/06/23/world/europe/23britain.html?hpw

Britain Unveils Emergency Budget

LONDON -- Setting the scene for years of potential strife with the powerful public-sector unions and their allies in the Labour Party, Britain's new coalition government on Tuesday unveiled the most severe package of spending cuts and tax increases since the early days of Margaret Thatcher's era.

George Osborne, the chancellor of the exchequer, held the budget box as he left 11 Downing Street for Parliament on Tuesday.
After only six weeks in office, the government of Prime Minister David Cameron took what his coalition of Conservatives and Liberal Democrats acknowledged was a historic gamble: that austerity measures will help balance the government's books without pitching the country into a double-dip recession.

The cuts and tax increases, including average budget reductions of 25 percent for almost all government departments over the next five years, will make Britain a leader among European countries, including Ireland, Greece and Spain, competing to show they can slash spending and appease investors worried about surging debt. But the sharp reductions defy conventional economic wisdom, which holds that governments should increase spending to stimulate growth when the private sector is weak.

The steps outlined to the House of Commons by George Osborne, the chancellor of the Exchequer, would cut the annual government deficit by nearly $180 billion over the next five years, shrinking Britain's public sector and instituting tough reductions in public housing benefits, disability allowances and other previously sacrosanct aspects of the country's $285 billion welfare budget.

Only health and international aid spending would be protected from the 25 percent cuts for government departments by 2015, the steepest fiscal spending reductions since the 1930s. Mr. Osborne also announced a two-year wage freeze for all but the lowest paid among Britain's six million public servants and a three-year freeze on benefits paid to parents for rearing children, in addition to new medical screening for people claiming disability benefits, part of a bid to cut $16 billion from the annual welfare budget.

Mr. Osborne also announced a raft of tax increases, though he was at pains to say that the government's plan to sharply reduce the country's $1.4 trillion national debt would rest on making roughly four pounds in spending cuts for every pound in tax increases, a point of considerable political weight in a country that is already among the highest-taxed in Europe.

The new taxes include an increase next year to 20 percent from 17.5 percent in the value-added tax on most goods and services, and an increase in the capital gains tax, to a new high of 28 percent, to curb what Mr. Osborne described as rich people in Britain "paying less tax than the people who clean for them." At the same time, changes in income tax will remove nearly 900,000 of Britain's poorest people from the income tax system altogether, and corporate taxes will also be reduced over a five-year period, to 24 percent from 28 percent.

"I

Re:And the other half of the story...

[Hognoxious]

Increasing the VAT will barely raise revenues if it does at all; it will mostly just lead to less consumer spending.

So you've calculated the price elasticity of demand for every product in the economy and combined them into a weighted average?

If you did that in your head I'll be really impressed.

Re:And the other half of the story...

[cduffy]

Right, but whether this is worthwhile depends on by how much.

That's why one must, as the parent said, calculate the price elasticity of demand to determine whether a tax will in practice increase or reduce revenue.

We did give them a tax cut!

[Manip]

The UK did give the Games industry a tax cut; small businesses and large businesses received a massive break in terms of what they have to pay. All this games tax relief would have done is given large UK games companies a third tax cut.

Currently they don't have to pay NI on the first 10 employees, pay less tax before they are up to corp' tax levels, and even when paying corporation tax they have to pay less than any other western country.

Re:We did give them a tax cut!

[LordAndrewSama]

We have to be this generous to attract talent, it's not like people move here for the weather or civil liberties :)

Re:We did give them a tax cut!

[Anonymous Coward]

They move here for the footba... never mind.

Re:Doesn't say who the game company is

[Suiggy]

No, it was probably Activision/Blizzard, they're bigger than EA now, and Bobby Kotick, the CEO, is a big bully.

Re:Doesn't say who the game company is

[lostmongoose]

US only you say? This is from the article you linked. Studios all over the world including 2 in Britain. Try again. http://en.wikipedia.org/wiki/Electronic_Arts#Current

Why tax cuts for the video game industry?

[hkmwbz]

I'm probably missing something, but why would the video game industry get special tax cuts? Is it because they can't sell enough games to cover the costs?

In that case, the video game industry should cut costs and make games people want to buy, yes?

Nintendo, for example, seems to be doing just fine. Maybe their strategy of expanding the market is the right way to do things, rather than expecting handouts from the government?

Re:Why tax cuts for the video game industry?

[Sockatume]

Tax cuts are used to encourage investment in a given field, to encourage a small-but-profitable industry to become larger. Industry growth create jobs which creates spending etc. etc., and when the taxes are switched back on, you now have more games companies paying taxes to the government. That "pays back" the money they lost by cutting taxes. It's only something you'd use in a nascent area, you wouldn't use it on an industry (North Sea oil exploration, say) that's as big as it's going to get for obvious reasons.

Re:Game companies should come to India instead

[somersault]

The UK is good for exporting haggis, but India is the IT bread-basket of the West.

You're either a very good troll, or an extremely obnoxious prick. Actually, it could be a bit of both.

Re:Doesn't say who the game company is

[Verunks]

No, it was probably Activision/Blizzard, they're bigger than EA now, and Bobby Kotick, the CEO, is a big bully.

it's all steve jobs fault http://kotaku.com/5559201/a-delightful-chat-with-the-most-hated-man-in-video-games

Re:Well we always knew

[somersault]

Yes, because we all know objectively that [your chosen political party here] is perfect and [any other political party] are immoral scum, and would plunge the earth into darkness, illiteracy and overabundance of [insert bad thing here] if they regained power.

Am I doing it right? Perhaps not polarised enough, and I need to detach from reality a little more?

Re:Doesn't say who the game company is

[sortius_nod]

Unfortunately linking a Gawker site ruins any credibility, funny, troll, or serious.

We all know it was Activision, after what Kotick did to Infinity Ward I wouldn't put anything past the fucktard.

He's destroying gaming brick by brick, and he knows it. All he cares about is how much money he makes, not any love of the games, industry or any altruistic reason. When someone comes out and says that a revenue stream for the company is it's lawyers, you have to think "do I really want to hand these guys my cash?". Worst thing is, that most don't think about that. The masses now game, so gaming companies care not for the culture, but for how many poor saps they can con into buying their products.

This story has done the rounds on many a gaming site and the general consensus is that it was Activision/Blizzard who stopped this massive tax break from happening.

I know I'm getting beyond TL;DR, but it's strange that a country trying to get out of recession would can a tax break that would have far reaching positive effects in the economy. I could only imagine how many development houses would gear up for major productions in the UK should this tax break go through. Then you see the trickle down effect give the economy a boost. It may not be as big as say opening a brand new copper mine, but it'll be a bigger shot in the arm than not allowing it to go through. The tax break would be offset no doubt by other taxes gathered from higher productivity.

The only reason to put a stop to this would be due to lobbying by a company (companies) that may be adversely effected by this. Maybe Activision are scared they may lose their top devs to new British start ups, maybe they'll lose them to already established British developers who can now afford more/better devs for bigger projects. It all makes sense. Then again, we'll never know. The new UK government is just as corrupt as the previous, and the next will be the same. As with all "developed" nations, the more money you have, the more you can corrupt the parliament.

Re:Huh?

[Burnhard]

Don't you think the treasury ran the numbers on whether it was worth it? We're borrowing £500,000,000 per day for goodness sake!

UK Weather is a BONUS for IT

[SmallFurryCreature]

Remember, the zero percent chance of sunshine is a bonus to nerds who prefer damp dank dark basements to ply their neferious trade.

Putting a game company on Hawaii is a surefire way to not get any talent what so ever. Proof? Name a single game company from a lush tropical paradise.

Nope, instead they are from the coldest frozen wasteland in the world: Canada. Nothing like sub-zero temperatures and a complete absence of sunlight for half of the year to drive a coder to his warm PC and start cranking out software.

Open a development shop on the north-pole and you will get the best MMORPG ever produced in six months time.

Re:Game companies should come to India instead

[TheRaven64]

Please mod parent up. I would like to encourage more US companies to outsource to India. As a UK resident, I am currently doing pretty well charging US companies ten or more times as much to fix code as the Indian companies that originally charged to write it. The more US companies outsourcing development to India, the better for the British economy.