UK government cancels gaming tax break plans

Chancellor George Osborne announces cancellation of "poorly targeted" games tax relief initiative announced in Labour's final budget; opposition brands it "a sad day for gamers."

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Previously announced tax breaks for video game developers will not be introduced after all, the British government confirmed today. In his first budget as Chancellor, George Osborne said the proposed games tax relief was "poorly targeted."

This goes against pre-election pledges from the Tory party, most notably statements made by current Minister for Culture, Communications and Creative Industries Ed Vaizey. After tax breaks were missing from the main Conservative manifesto, he assured developers that follow-up proposals would "include details for our support for video game tax breaks." He also said that tax relief for developers was "going to be our party policy." He did, however, clarify his statements by suggesting that the proposed tax breaks themselves might be "too narrow" and suggested that other avenues could also be explored to provide support for the industry.

Talking to GameSpot UK, Labour MP for West Bromwich East and longtime industry defender Tom Watson said, "The Conservatives gave a solemn promise during the election that they would honour the commitment to video games tax relief. They have broken that promise. There is little that the industry can now do to stem the exodus of UK developers to our competitor nations like Canada."

UK game development trade body Tiga condemned the Coalition Government for not including gaming tax relief in the budget, saying it had gone back on pre-election promises. Tiga CEO Richard Wilson didn't mince words as to what he believes the move's effects will be, saying, "Jobs will be lost and we will cease to be a leading developer of video games."

Wilson did admit that the reduction in corporation tax would offer some assistance to game developers but said it did not address the sector's "specific needs." The fight for games tax relief would continue, he said, "To ensure that the UK is the best place in the world in which to do games business."

ELSPA, the UK trade body representing video game publishers, echoed those sentiments saying, "Bearing in mind the pre-election commitment towards tax breaks made by the Conservatives and the Liberal Democrats we are extremely disappointed by the outcome of today's budget."

However, ELSPA went on to say that, "in the absence of tax breaks, it is the essential that the government work with our industry to ensure that the policies, which we have outlined--such as addressing the skills gap and better access to R&D initiatives--are implemented."

Announcing the budget, Osborne also revealed that the standard rate of VAT--UK sales tax--was to rise to 20 percent from the current 17.5 percent from January of next year. If this is reflected in the price paid for games at the till, this would represent a rise of approximately a pound on a standard-price console game.

Responding to industry criticism, Vaizey said, "I am disappointed that we were unable to go ahead with a tax break for video games." He said that the coalition government remained "absolutely committed to supporting the video games industry, which offers so much to this country," and that he would "set out some ideas and proposals next month" on how best the government could support the games industry.

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