UK vs. Canada: Do Tax Breaks Build An Industry?
September 7, 2010 Page 1 of 3
When newspaper editor Horace Greeley suggested back in 1865 that people looking for work "Go West, young man," he surely didn't have the games industry in mind. But that is exactly what some UK developers are considering, given the state of the games industry in their country. Picking up stakes and moving to Canada and the U.S., some say, is starting to look better and better.
That's partly because of the UK budget passed in May with no tax breaks for game developers, disappointing the region's industry which had been hopeful the breaks would be forthcoming. Canada, on the other hand, has become increasingly attractive, as its regional governments have extended tax incentives to developers.
Four months later, Richard Wilson, CEO of UK video game trade organization TIGA, reports that "every development studio I speak to in the UK tells me stories of how some of their senior personnel have gone overseas."
"I estimate we've lost several hundred jobs already, mainly to Canada, because several of their provinces offer very generous levels of support and they are interested in bringing over UK game developers," he says.
He describes the situation as a serious blow to the UK games industry and says losing the tax breaks came at just the wrong time.
"We are competing with the rest of the world on an uneven playing field," says Wilson. "In 2006, the UK games industry was the third largest in the world in terms of revenue generation; we have since fallen to fifth place."
Meanwhile, in Canada, Danielle Parr, executive director of the Entertainment Software Association (ESA) of Canada, says her government recognizes that the video games industry has become one of the fastest-growing entertainment sectors in the world.
"Our jobs openings attract highly skilled people whose salaries average $68,000, which is pretty good, especially in today's economy," she says. "And our government is keenly aware that the world economy is changing -- that its future is in intellectual property -- and it understands that there is a huge potential for our country's economy in industries like video games."
As a result, Quebec offers tax credits of up to 37.5 percent on labor expenditures, and Ontario offers up to 40 percent.
"These are non-refundable tax credits, so you get them whether you make money or not," explains Parr. "They aren't refunds on your taxes; you get them as long as you spend the money. So, the way they are designed works very well for industry." She claims the tax breaks have been influential in making Canada the third largest global producer of video games.
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