Game devs beg UK taxman: Can we pay 30% less? Companies involved in making video games in the UK should receive a tax break worth 30 per cent of what they owe, a trade association has said. TIGA, whose members include developers and technology firms involved in the UK video gaming industry, said a new Games Tax Relief (GTR) should be available to firms that incur costs …
Not very well. You incidentally (though not intentionally, I'm sure) characterised unemployed people as scroungers sitting on their arses playing games. Ain't true for many (me included). I'm not crafty enough to get anything out of the dole fund, and I'm holding off on the games I'd really love to play until I'm gainfully employed again.
But what the hell - I agree with your tone. These buggers should focus on having a profitable business plan and not expect an already bankrupt system to make their lives any easier.
"But what the hell - I agree with your tone. These buggers should focus on having a profitable business plan and not expect an already bankrupt system to make their lives any easier."
That's a bit simplistic. The key problem is that other countries - Canada and France, most notably - are already offering significant tax breaks, which has resulted in UK development being too expensive, which in turn leads to 1st/2nd party studios being shut down[*] and a brain-drain effect as developers are forced to leave the country. So establishing tax breaks in the UK is arguably just levelling the playing field.
(insert argument about protectionism here)
There's also other factors to consider: the economic benefits of the UK Film Tax Relief has been pretty impressive.
http://industry.bfi.org.uk/media/pdf/j/i/The_Economic_Impact_of_the_UK_Film_Industry_-_June_2010.pdf
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On a turnover of £3.4 billion, the core UK film industry directly contributed around £1.6 billion to UK GDP in 2009. This means that the core UK film industry contributed more than twice as much to GDP as the machine tools manufacturing industry [and] three times as much to the economy as the designer fashion sector.
...
without the UK Film Tax Relief in place, we estimate that its film production would be around 75% smaller, reducing UK GDP by around £1.4 billion a year and Exchequer revenues by about £400 million a year. Since the Film Tax Relief costs HM Treasury around £110 million a year, this means it generates about £13 in GDP for every £1 invested.
...
we estimate that around £1.9 billion of visitor spend a year might be attributable to UK films.
In 2009, this additional spending was estimated to be worth £950 million to UK GDP and £210 million to the Exchequer.
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In other words, the Film Tax Relief has turned out to be a highly profitable investment for UK plc. And while the games industry arguably doesn't employ as many people and doesn't have quite the same potential for "visitor spend", there's a lot of potential for a higher ROI. For instance, Grand Theft Auto 4 (which, incidentally, was made in Scotland by Take Two Interactive) grossed nearly one billion pounds by itself - more than any of the individual Harry Potter films...
[*] Sony Liverpool - nee Psygnosis - are a very recent and visible victim - though this is arguably at least partly because Sony decided to have them doing little else other than pumping out Wipeout sequels for the last decade
"Simplistc" - I guess so. It's about as simplistic a response as the original idea seemed to be.
However, I take you point about the potential for a good ROI if such a venture was successful.
It boils down to the potential for benefit to UK GDP (and most importantly for employment and tax revenue) vs the risk of loss if the tax break does not lead to success.
I would expect a solid believable business plan and a high-ish probability of success before shelling out money in the form of tax breaks. And even then, maybe tie the recipients to a commitment to return the value of the tax break ten-fold (or whatever figure suits, bearing in mind the risks).
If it's not profitable, stop doing it. It's a very simple business rule.
But there seem to be no shortage of indie programmers, indie studios, smaller companies that are happily making lots of money on everything from smartphones to Steam selling games they've written. If it wasn't profitable, they wouldn't be doing it.
And I can't imagine that video games production results in a significantly large number of jobs etc. in related industries to actually make it a priority for government (yes, Game is gone but that's nothing to do with the lack of UK software developers as much as that bricks-n-mortar games stores are old-hat and behind-the-times).
Seriously, if you need a 30% tax break to write profitable video games (an unnecessary luxury, by any standard), then maybe you shouldn't BE writing video games.
I think, no matter what the government does, the games industry will continue to do what it's always done and nobody will notice any difference. Sure, that means a games publisher or two will be bought out or go out of business once every few months, but that's what's *always* happened since the industry existed and has nothing to do with the tax they pay.
There are a LOT more important industries to support at the moment. I think anything associated with non-educational video games would be at the very bottom of my list.
"There are a LOT more important industries to support at the moment"
Au contraire, none of them should be supported. The history of all forms of government support to industry, through grants, tax favours, or legislative favouritism has been one of unmitigated failure.
If government want to support business, then the tax changes need to be (1) lower corporation tax for all companies, (2) end employers NI just a tax on jobs, (3) Drastically simplify the tens of thousands of pages of tax bollocks, make it so simple that there's no loopholes to exploit - about ten pages should be more than sufficient.
"Seriously, if you need a 30% tax break to write profitable video games (an unnecessary luxury, by any standard), then maybe you shouldn't BE writing video games."
I read part of the argument as being that modern games do not fit with a classic Development-Release cycle that most products follow. If I'm JCB, I spend money developing an excavator, then I spend money to build it before selling it and paying the taxman a proportion of my profit after deducting both my manufacturing and development costs.
In modern gaming, free additional content packs and such are a business expense and as such should arguably be counted pre-tax. However, they can't because of the >1yr nature of their release.
For instance I buy a game for £40. It cost £25 to develop and distribute, so the developer is taxed on their £15 profit. A year later, they release (for free) additional content worth £5.
Had that content been available and bundled with the game at release time, they would have made only £10 profit and only paid tax on that £10.
As it is, they've paid tax for £15 despite only making £10 on that game. Of course, one can argue that that is simply an expense of attracting users to stick with their product, which is true, but then it's not a luxury - it's expected of developers and people abandon products which are perceived as stingy and do not offer "added value" down the line. That means we put ourselves at a disadvantage since everyone else seems to be offering tax breaks, which would be a shame as we have some stonking good studios who have produced some of gaming's greatest franchises.
(I have deliberately left patches and updates out as that's the equivalent of a recall and the manufacturer obviously should be absorbing that cost, just as Toyota do, on a regular basis...).
This is a common problem, not just for computer games, so the tax system doesn't work like that.
To continue your example, suppose JCB sold a digger with a five year service contract. It would be unfair to treat the entire income (cost of digger + cost of service contract) as profit in the first year, when JCB would have to spend money in the future to meet the contract obligations. So there are tax rules that let you defer the income.
Computer game publishers ought to be able to account for future downloadable content in the same way.
GTA 8 Opening Scene:
A tattoo'd skinhead comes stumbling down a rickety staircase, his BNP T-Shirt spotted with blood,
"I jast been up the apple n' pears wiv my shoota. I 'ad to waste that bird on account of she was a slaaaaaaag. She's brown bread nah, let's do one before the rozzers get 'ere" he grunts as he pushes past.....
British enough to get a 30% tax break ?
If our tax laws make it difficult for business to compete then why single out Game Dev's for special treatment? Shouldn't this be across the board? Maybe the case is we are just getting taxed too much to be competitive in anything without special exceptions like this?
Just seems, very unfair to everyone else.
Yes, certainly part of this is to compete with the breaks that Canada offers its game / film industry and to try and keep home-grown talent here, rather than have it seduced overseas.
I do agree somewhat with the "why the fuck are we so special" view, but then again, we are a multi-billion dollar industry that is only getting bigger and bigger, so why not try and re-settle some major development efforts in the UK with a basket of tax gifts ...
Smells very suspicious this whole article, and I'm of the view that this isn't coming from the developers, but from the private equity financiers, looking to wring more cash out of their investments.
Take that crap from TIGA about after-launch development costs. Games companies can already offset their development and bug fix costs against taxable profits as an operating cost. And look at the expression "tax relief on 30% of what they owe" - very suspicious, given that trade payables from a games coding business is going to be next to nothing. If they've got debt, then the interest is already tax deductible....but wait! What happens when a loan is in place but isn't being serviced? No deductibles there, unless the rules change.
I reckon this is nothing to do with IT, just the city wide boys who invest in games companies sensing a half witted government that will fall for the shallowest of arguments (like the business case for HS2, Heathrow runway 3....) and seeking to get their piece of the pie.
The software development community... the only industry where lots of people feel they shouldn't be unionised, that it shouldn't get the tax breaks every other industry lobbies for, where innovation shouldn't be protected, and where there is a dominant ideology that the product should be given away for its marginal cost of production (*)
(*) yes, I am aware that there is some sophistry by which it is claimed that the GPL doesn't mean that things have to be free as in given away, not convinced this stacks up in reality.
http://www.guardian.co.uk/technology/gamesblog/2009/sep/27/videogames-hollywood
An industry bigger than hollywood begs for tax breaks?
If GTA set as it is in the states with thinly disguises US cities gets it... wow, what's next? its a bit like classifying independance day as a british movie for that bit where a british bloke goes 'is that the americans? bout time they came up with something'
and this has filth written all over it. even if the definition of british culture was tightened and somebody greenlit, erm, GTA: Catford where you drive round in a Ford Sierra trying to collect the complete set of traffic lights to wait at whilst people pour out of pubs shouting 'leave it wayne, eees not worf it' then i guarantee there will be 1000 people 'working' on it and very few on the 'other' titles. totally ripe for abuse.
"Games Tax Relief (GTR) should be available to firms that incur costs working on updates or in fixing problems with games that have already been released in addition to developing the games in the first instance."
So let me get this straight. They think it's OK to release buggy poor quality games software, and they want tax relief on their efforts to fix up and patch broken products that were released with sub-standard quality assurance and testing?! I seriously can't believe the sheer cheek in what I'm reading there!
The gta games and everything rockstar does draws very heavily from American culture, especially film. For games produced largely by British people they're some of the least british games. That doesn't warrant a tax break based on promoting British culture.
In fact my concern with these tax breaks is it'll do nothing for British culture. They'll keep pumping out games with US. Pice actors regardless of the game's location and the locations will still largely be based in the US or where ever the US is doing war.
Video games are still culturally a ghetto. They rarely try to appeal to anyone who isn't an American teenage boy.
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