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Braben: UK Dev Relief Shouldn't Have Been 'Classed As A Tax Break'
by Leigh Alexander [PC, Console/PC]
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July 9, 2010
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The UK government's decision to scrap planned tax breaks for game developers from its budget in favor of an overall lower corporate tax has left many in the region's industry disappointed and discussing. Add to these Frontier's David Braben, who's urging a pragmatic approach toward finding a solution.
Braben says the region's industry should continue working with the government "to understand what has happened here." Although he tells Edge Online that the lack of tax relief "does do quite a lot of damage," he suggests the solution lies in discovering the government's reasoning and taking an alternate approach that considers it.
"The trouble is it got classed as a tax break," he says. "Call it a 'measure' or whatever, and it sounds different; it’s [about] the way these things are presented. I think there are, within government, groups that have no belief in games. It’s strange to me that the film tax break is treated differently from the games one."
For a developer like LostWinds and Kinectimals creator Frontier, however, the decision is "very disappointing," Braben adds. "The message is that we’re not valued and that’s a shame." Further, the studio -- and the UK industry in general -- will assuredly lose talent as a result, he adds.
"That is something that’s happening," he says. "It’s a question of whether it increases as a result of all of this."
Both the UK's Labour and Conservative parties had pledged to support tax breaks. At the same time, a more favorable public attitude toward games had been developing in the UK, led by a comprehensive review by Dr. Tanya Byron and increasing attention to ratings labels from PEGI. But it seems the climate for game developers in the UK has been increasingly challenging over recent weeks.
Tax breaks were scrapped from the budget late in June, as the government cited wider economic stress -- a move ELSPA's Michael Rawlinson called "cynical." Shortly thereafter, Labour MP Keith Vaz took up an old mantle in publicly calling for more scrutiny of game violence -- Vaz had been instrumental in the banning of Rockstar's Manhunt and Bully from the region. Recently, Activision CEO Bobby Kotick indicated his company would need economic incentives in order to invest in the region, even as his company joined UK trade body TIGA just a day before.
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However they have effectively ended or closed a variety of regional media development efforts and several other so-called austerity measures. The games assistance should be viewed among the backdrop of all of that activity rather than be seen as a special victimisation.
All that being said, the case for tax help for games has never really been properly made and it was a contentious issue. While TIGA and the like argued that it was a natural right (If film had it, why not games) yet the effect of such schemes on other media like film is repeatedly shown to affect the kinds of projects that get greenlit and - ultimately - make those industries utterly dependent on funding and the politics of funding. This is not something that I think would be a positive for the British industry overall, as the spectre of cultural tests and the like are bad.
The reduction in corporate taxation from 28% to 24% is thus more significant because it provides substantial savings of a generalised nature. It's not an ultimate panacea but it's pretty good and could provide much breathing room for UK publishing in general.
Lastly, it could simply be the case that the UK economy is always going to be more conducive to smaller-scale indie development. With the advent of App Stores and social platforms, the cost of publishing neat game ideas is rapidly declining and there is an opportunity for motivated developers to basically reboot the UK industry as a next generation of what used to be called bedroom coding. To add tax breaks into that mix thus seems more of a ploy to prop up the existing mid-sized difficult-to-find-viability companies that have been waning all across the UK in the last few years. And is there really a compelling case for doing that?
"The message is that we’re not valued" Err.. could you please elaborate? Valued more than those who take out my trash? Cure me when I'm in hospital? Defend my country? You make fucking videogames and you should pay that same tax as everyone else. Free government handouts are over.
If you really wanna stimulate the industry then encouraging startups should be the case not helping established profitable players.
The only reason why you should open up shop in the UK is that there is a superior educated workforce that makes awesome games. And that tax breaks do not deliver.
Canada has tax breaks? Great we'll move to Canada! What no more tax breaks there? Great we'll move to the next country that has them. But if tax breaks are the only reason to have presence in a country it will not be sustainable in the long term.
As an entrepreneur you should feel SHAMED for asking for government grants and bailouts.
Studios lower their cost, government increase its revenue, developpers can find high-paying jobs with plenty of disposable income to improve the local economy. Everybody wins! Well, except the UK. Keep sending your jobs over here, local competition increase my salary :)
Apples and Oranges. Game studios produce an export product that sells world wide. And the studios move to where they can be more profitable because the devs can be moved. I am in CA(USA) and see frequently how taxing drives companies away. The film industry (entertainment publishing) is a far better comparison. The idea here is to bring more money into your community so everyone benefits.
Then why not apply it across the board to many or all industry sectors?
Which is what the UK budget did. Which is fine, except that it also increases the VAT, the result of which is to shift revenue collection from producers to the consuming public who get stuck at retail with all the costs that get accumulated and passed on. Making it cheaper to develop new products won't do you much good if consumers have less money to spend on your products.
Actually, regardless of where one stands on the actual issue, it's disturbing to hear anyone suggest that the solution is not to do the right thing but instead to misuse language to deceive legislators into favoring one option. Although the stakes are lower, that's little better than Newspeak, where raising taxes becomes "investment" and reality is negotiable. If cutting taxes for one industry segment really is right, if there's a clear overall benefit as some believe, then they ought to come straight out and say so.
If you are advocating tax breaks based on how high someone is paid then investment banking surely must come first. Or if you are looking at ROI on projected taxes then why do not extend it to all new businesses?
My point being on what basis do you single out videogames. Just because it's the industry you are in? Pretty self-serving if I may.
@John Tessin
By your logic Silicon Valley would not exist since being there reduces profitability. But since the best engineers are there if you want to compete in IT that's the place. I am not aware of any special treatment in terms of taxation. Same thing with Orange County. Do you think that if the Mexican Government would offer massive tax breaks everyone would fire their US employees to Tijuana? Of course not.
You want the best people for your company. Then you also need to recruit cannon fodder: QA, support, etc. Lower paying jobs that you would rather keep in an English-speaking country or at least somewhere with legislation that protects your IP. And for for those jobs tax breaks matters.
My point being that tax breaks is simply another way of subsidizing slightly skilled labor, the same way it would have been with the car industry 30 years ago to protect from Japanese manufacturing.
If your point was about exports then pray tell on which basis do you prioritize tax breaks for games vs another company that exports intangible goods? Or tangible ones for that matter.
I think the game industry is unusual in the regard that a very *high* number of jobs are well-paid, and that salaries form a very high % of the expenses. You mention banking, which has a few people with outrageous salaries but the main bulk of the employees in a bank still earn rather low. In a similar way, I think the game industry compares itself favourably to most industries, including Film & Music, which gets tax breaks in UK.
You also mention "why do not extend it to all new businesses". You'll be happy to learn that in Quebec the tax breaks encompass more than just videogames, it includes all multimedia businesses and others that share the same desirability.
I do agree that taxes breaks should not be used to make an otherwise unprofitable venture survive, but I think UK canceled its plans for all the wrong reasons.