Slashdot Mirror
Saving the UK Games Industry
arcticstoat writes "Following the cancellation of games tax relief in the 2010 UK budget, the UK games industry is now feeling increasingly threatened by Canada, France and some US states that offer tax relief to their games businesses. What's more, it looks as though the R&D tax credits scheme offered up by UK Chancellor George Osborne in last week's budget speech is nowhere near enough to enable UK-based games studios to compete internationally. 'In terms of magnitude, games tax relief would be much more generous,' says Dr. Richard Wilson, CEO of the UK games industry's trade association TIGA, in this in-depth interview about the need for games tax relief in the UK. 'The proposals we've been campaigning for would allow games companies to basically put in a claim for a reduction in corporation tax of between 20-30 per cent on given projects. The R&D tax credits are much smaller in magnitude – we're talking somewhere around 4-5 per cent.' Is this enough to enable UK game studios to compete with the likes of Canada? 'Good grief, no,' says Wilson, 'absolutely not.'"
Do you get tax relief if you can hold your breath for five minutes? You know, some kind of cap 'n trade thing. And no farting..
For justice, we must go to Don Corleone
e.g., 'You better give us tax breaks, or we won't give you jobs, hahahahaha'. This is why I'm a socialist in favor of strong central gov'ts. No matter how bad the gov't gets, there's always a tiny, tiny chance they'll turn out OK. Corporations are intrinsically jerks.
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No joke is ever overused. Go ahead and let it rip!
e.g., 'You better give us tax breaks, or we won't give you jobs, hahahahaha'. This is why I'm a socialist in favor of strong central gov'ts. No matter how bad the gov't gets, there's always a tiny, tiny chance they'll turn out OK. Corporations are intrinsically jerks.
Let's suppose you then set up a strong central government with socialist policies. And then some other country that you do not control decides to offer a marginally better deal for businesses that locate in their jurisdiction. One would hope that you don't claim the right to force that other country to adopt your sort of policy or to force the company not to do business with them. The worst you can do is forbid them from importing their game they made elsewhere into your country, giving you the triple whammy of pissing of your citizens, denying you sales tax revenue and then having to deal with the porous nature of the internet. See, e.g. the US online gambling ban (and obvious corollary to anything that can be distributed digitally).
Socialism or central control doesn't solve your problem here at all unless you are really talking about worldwide socialism and one-world-government, about which the less said the better.
Tomb Raider, Hitman, Commandos, Deus Ex, Legacy of Kain, Thief, Timesplitters, and Fear Effect. That's just one studio.
Man who leaps off cliff jumps to conclusion.
It's so hard to cut spending because no matter what program you cut, some group and some trade association or citizen group has a vested interest in it. I say good job UK. It's not like video games is a infant industry that needs support. All government funds can do is muck up efficiency. Good games will do well in the UK and great games will get distribution internationally and in the long term, the industry will be healthier and the government will have one less thing sucking at it's teat. Support from the government will only lead to more and more need for support after the first hurrah's, and the industry slowly slides worse and worse. For reference, see every industry ever with government support over the last 50 years
What right does an English citizen who wants to make video games have to move to the US or Canada?
The absolute right. England is not a prison, you can't hold people against their will.
I'm not denying them the right to move or pay taxes in my preferred locality but in effect the argument is shifted onto the government to be held hostage by corporations when it should be on the corporations to deal with their locality and accept that taxation is part of the system.
I don't see any argument being shifted by anyone. A company is free to set up wherever they please. England cannot force an American company to set up shop in London, never could, never will. You are arguing about what has always been the case -- that companies will chose to do business in friendly jurisdictions and that the citizens of those jurisdictions have the right to set those policies in accordance with their preferences.
The contrary position -- that one national government can coerce a corporation headquartered elsewhere -- is internally unworkable in the case of >2 governments anyway.
For the record, if a UK game company moved to the US over taxation the best answer would be to simply charge them an additional surcharge to place their games on the shelves.
Leaving aside that it is totally illegal under existing law to charge different import taxes to different companies importing the same good, the UK isn't a large enough market that this would make a difference.
In essence it would be passed onto the citizens of your own country but it would be a perfect way to execute protectionism which is definitively different from socialism.
Given the elasticity of videogame purchases, the cost of a high tax is born by the supplier not the consumer.
One studio that, as a different AC pointed out, was bought out by Square Enix, a Japanese corporation.
What my fellow AC neglected to point out is that Eidos only has a single studio left in the UK. Oh, and of those games you list, only Tomb Raider and Timesplitters are British.
The rest are:
Hitman - Denmark (IO Interactive)
Commandos - Spain (Pyro Studios)
Deux Ex - US (Ion Storm)
Legacy of Kain - Canada (Silicon Knights) / US (Crystal Dynamics)
Thief - US (Ion Storm)
Fear Effect - US (Kronos Digital Entertainment)
Oh, and that reminds me:
Tomb Raider, since 2006 - US (Crystal Dynamics)
So... yeah.
It depends how much it costs you to give that industry the breaks it's asking for. If it costs a lot to set up a different taxation mechanism for that business but the returns are low (because the industry employs few people, or because it is mobile enough that someone else can offer better tax breaks and they can relocate in months) then you might not see a return on that investment. Worse, you risk creating a loophole that other businesses can abuse to avoid taxation. I do think the government should be doing everything to encourage the UK gaming industry - it's got a great pedigree and it can potentially be great for the country - but it's not a black and white situation at all.
I'm British. I pay British taxes. My short response to this revelation that we don't subsidise the game industry from public funds any more is:
"Fucking good!"
My full response is:
"What the hell? We PAY people from public funds to write computer games just so we can compete with other country's computer games?"
Of all the myriad taxes, charges, jobs, cuts and everything else going on, this is seriously making the whole UK games industry look like a bunch of whiners.
How about this - you're running a business. It produces a product. That product is FAR from essential. In fact, it's as much luxury as is conceivably possible to the ordinary man. You build it, sell it, make a profit, pay your staff. Like every other business in the world.
And I'm assuming these tax breaks don't even run to business software, or healthcare software, or educational software, or the myriad other types of software which could conceivably be useful? No, just games.
Seriously. You're making yourselves look like arses, in public, in times of austerity - people were smashing up London the other day because the government has made cuts, what do you think they'd do if they thought for a second their tax was going to help write computer video games?
I'm not one to blame everyone on the recession and yell about how bad people have it but this is just ridiculous. Get off your arse and make a product that sells. Yeah, you might conceivably add a job or two if you were giving huge tax breaks by the government, but so would any other industry.
Ain't that the truth. If only the nimby environmentalist anarcho-luddites would allow us to farm unicorns genetically modified to shit gold we could all be as rich as Croesus.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Right on comrade, we should carry on borrowing and spending and let the next generation pay for it all.
For all intensive porpoises your a bunch of rediculous loosers
Of course, you are missing the point that under the current system, the point of corporations is to make profits for their owners. If a corporation and its owners currently exist in the UK and are paying UK taxes, then it is totally feasible to set up a system of taxation and tariffs that prevent this ownership from moving around, or eliminates the benefits of moving it around. Just like the US government requires its citizens to pay income taxes for income from their employment, a government could easily require its citizens to pay income taxes/capital gains taxes on assets they are holding around the world.
So let's say that I, as an American, buy a rental property in the UK. You state that I should pay both UK taxes on the income (income made in the country is taxed by that company), and then US taxes on the income? And you liken this to an income tax? Yea... that is such a crazy-bad deal that I would switch citizenship.
I'm sorry, I normally favor the UK in this system, but if you move your company overseas, then it is taxed overseas.
I'm in canada. We're happy to take all those jobs. Because we give back 40% of the salary paid to game developers here in ontario. If you have payroll over 1 million dollars you can get that money faster, if not, you have to wait until the end of the project.
The UK is stuck between a rock and hard place on this one. A desperate need for revenue from corporate taxes, balanced by a desperate need for income taxes, and being no where near a competitive labour market for either of those.
Ideally, in an age of austerity, no one would be offering 40% tax breaks to any industry. But here in canada, and ontario in particular, we're trying to build a games industry. So we're offering huge tax incentives to get people to either move here, or startup here. Either the UK can try and claim unfair trade and subsidy (probably legitimately), and demand places with low taxes on game developers stop doing that, which would take years and might fail. Or you can match them, and keep what you can of income taxes and so on.
A 5 or 10% difference probably isn't enough to persuade someone to move. But 40%, which is more or less what they'd get in Ontario or Quebec is pretty hard to refuse.
Of course, you are missing the point that under the current system, the point of corporations is to make profits for their owners. If a corporation and its owners currently exist in the UK and are paying UK taxes, then it is totally feasible to set up a system of taxation and tariffs that prevent this ownership from moving around, or eliminates the benefits of moving it around.
Which make UK corporations less competitive with respect to those in other jurisdictions and encourages anyone setting up a new corporation to chose those jurisdictions instead of the UK.
Just like the US government requires its citizens to pay income taxes for income from their employment, a government could easily require its citizens to pay income taxes/capital gains taxes on assets they are holding around the world.
I believe they have obligations under bilateral tax treaties that prevent this.
Of course, the UK could withdraw from the US-UK tax treaty but the net result would be significantly lower investment and business in the UK, driving up prices for UK consumers and businesses. That is, the UK benefits from allowing US corporations to sell shit in the UK and pay only UK taxes but we would not grant the UK that privilege unless they allowed UK corps to sell shit in the US and pay only US taxes.
IOW, you are mixing up the concession and the benefit. The UK concedes that it will not require its citizens to pay income tax on assets elsewhere because it wants the benefit of having the citizens of other countries' citizens doing business in the UK on the same terms.
This would not prevent founders from changing citizenship and then creating new corporations abroad, but that is not a very credible threat anyway - people don't change their citizenship on a whim
No, but corporations do move entire offices around if they think they are getting a raw deal.
However, it would effectively stop domestically owned corporations from evading taxes by moving abroad.
Back to point one: now domestically owned corporations are at a material disadvantage and their market-share will shrink accordingly. Meanwhile, some more business-friendly jurisdiction eats your lunch. Heck, the worst case the corporation can dissolve itself and reform in another place under foreign ownership, nearly intact.
Conceptually, it is really not that difficult to set up a tax system in which there is no real threat of corporations moving abroad due to taxation (the devil's in the details of course). The problem is a political one. Nobody in power really wants to set up such a system because of vested interests.
The devil's in the fact that you can't force everyone to cooperate with your scheme, and so either the corporation moves or their foreign competition has a favorable cost-basis.
The more rules you make, the less competitive you become relative to everyone else. No one that buys a video game cares if it's made in the UK or Canada, and if the latter has lower costs and can therefore deliver better games, consumers will chose them. Maybe UK game developers are intrinsically so much better than Canadian ones that they will still compete but I doubt it.