The UK and EU games developers' trade association, Tiga, is calling on the government to compare the UK tax system, and its tax incentives, to that of the other G20 countries, all of whom yesterday completed talks on how best to kick-start the world's receding economies.
Tiga CEO Richard Wilson believes that the UK should be using the G20 as a way to compare tax policies, especially those for the games industry, in order to keep them competitive. "If the Government is serious about supporting innovation in businesses then it must measure the effectiveness of tax incentives, such as the tax credit, that are available to the video games industry in the UK compared to those of other countries. The UK tax system does not operate in a vacuum," he said.
This isn't the first time the UK tax system has been highlighted as an issue for the games industry. In 2007, Canada introduced a wave of credits and tax breaks for games companies looking to set up base there, with several high-profile companies, including EA, Ubisoft, and Capcom, taking advantage of the offer. The wave of companies moving to Canada caused the UK to fall from the third largest to the fourth largest producer of video games with reports that it may slip to fifth in 2009.
The lucrative tax deals on offer in Canada caused uproar by British and Australian developers who demanded that similar measures be introduced, before joining forces themselves to lobby for tax breaks on their home turf. Though Australia was not successful with a bid to extend a 40 percent investment from the film industry to the games industry, developers in France gave others in the EU hope when they secured EC approval for tax incentives on home-grown games.
While many analysts have often described the games industry as recession proof, massive losses, staff culling, and even bankruptcies have dented the confidence of many in the industry, despite overall strong sales and growth. These issues, combined with reports that also indicate that the recession may stifle innovation in the industry, could put pressure on governments to look into new tax breaks for games companies as part of larger stimulus packages.