UK Video Game Tax Cuts Sabotaged?

ninjacheeseburger writes "Develop recently published an article claiming that the UK government was put under pressure by one of the biggest game companies in the world to cancel planned tax breaks for video game developers. This company had apparently viewed game tax relief as a measure that would have given the UK an unfair advantage over other nations."

And the other half of the story...

[Hadlock]

The economy is bankrupting the UK. Fark puts it succinctly: "Facing a massive budget deficit, the UK to cut welfare, increase the VAT to 20 percent, and impose a new tax on anyone who brings one of those damn vuvuzelas back from the World Cup". Chancellor George Osborne is doing what all countries should do in that situation but are afraid to do, due to the unlikelihood of reelection. The country is damn near bankruptcy, the whole European continent is over-leveraged on debt and Britain is doing their best to make an example by balancing their budget. Tax handouts to the entertainment industry don't help balance the budget. Insert snarky comment about US legislators growing some balls and balancing our budget here...

Here's some more info on the subject:

from the NYT http://www.nytimes.com/2010/06/23/world/europe/23britain.html?hpw [nytimes.com]

Britain Unveils Emergency Budget

LONDON -- Setting the scene for years of potential strife with the powerful public-sector unions and their allies in the Labour Party, Britain's new coalition government on Tuesday unveiled the most severe package of spending cuts and tax increases since the early days of Margaret Thatcher's era.

George Osborne, the chancellor of the exchequer, held the budget box as he left 11 Downing Street for Parliament on Tuesday.
After only six weeks in office, the government of Prime Minister David Cameron took what his coalition of Conservatives and Liberal Democrats acknowledged was a historic gamble: that austerity measures will help balance the government's books without pitching the country into a double-dip recession.

The cuts and tax increases, including average budget reductions of 25 percent for almost all government departments over the next five years, will make Britain a leader among European countries, including Ireland, Greece and Spain, competing to show they can slash spending and appease investors worried about surging debt. But the sharp reductions defy conventional economic wisdom, which holds that governments should increase spending to stimulate growth when the private sector is weak.

The steps outlined to the House of Commons by George Osborne, the chancellor of the Exchequer, would cut the annual government deficit by nearly $180 billion over the next five years, shrinking Britain's public sector and instituting tough reductions in public housing benefits, disability allowances and other previously sacrosanct aspects of the country's $285 billion welfare budget.

Only health and international aid spending would be protected from the 25 percent cuts for government departments by 2015, the steepest fiscal spending reductions since the 1930s. Mr. Osborne also announced a two-year wage freeze for all but the lowest paid among Britain's six million public servants and a three-year freeze on benefits paid to parents for rearing children, in addition to new medical screening for people claiming disability benefits, part of a bid to cut $16 billion from the annual welfare budget.

Mr. Osborne also announced a raft of tax increases, though he was at pains to say that the government's plan to sharply reduce the country's $1.4 trillion national debt would rest on making roughly four pounds in spending cuts for every pound in tax increases, a point of considerable political weight in a country that is already among the highest-taxed in Europe.

The new taxes include an increase next year to 20 percent from 17.5 percent in the value-added tax on most goods and services, and an increase in the capital gains tax, to a new high of 28 percent, to curb what Mr. Osborne described as rich people in Britain "paying less tax than the people who clean for them." At the same time, changes in income tax will remove nearly 900,000 of Britain's poorest people from the income tax system altogether, and corporate taxes will also be reduced over a five-year period, to 24 percent from 28 percent.

"I

We did give them a tax cut!

[Manip]

The UK did give the Games industry a tax cut; small businesses and large businesses received a massive break in terms of what they have to pay. All this games tax relief would have done is given large UK games companies a third tax cut.

Currently they don't have to pay NI on the first 10 employees, pay less tax before they are up to corp' tax levels, and even when paying corporation tax they have to pay less than any other western country.

Re:Doesn't say who the game company is

[lostmongoose]

US only you say? This is from the article you linked. Studios all over the world including 2 in Britain. Try again. http://en.wikipedia.org/wiki/Electronic_Arts#Current [wikipedia.org]

Re:And the other half of the story...

[Hognoxious]

However, these tax breaks for the gaming industry were not only pre-election pledges, they were pre-election pledges for both parties.

O RLY?

http://www.mcvuk.com/news/38468/No-game-tax-breaks-in-Tory-manifesto [mcvuk.com]

http://www.guardian.co.uk/media/2010/apr/12/labour-manifesto-libel-legislation [guardian.co.uk]

Re:Doesn't say who the game company is

[Anonymous Coward]

Just for the record, businesses can reclaim VAT - it's a consumer level tax, and one that's only applied to non-essential items. Food (unless consumed in a restaurant), Water, and Utilities are all VAT free.

That said, the change is from 17.5% to 20% - so in real terms about a fiftieth of the price. A £1 hike in the cost of a £50 game isn't really going to scare people off much.

Re:Why tax cuts for the video game industry?

[Sockatume]

Tax cuts are used to encourage investment in a given field, to encourage a small-but-profitable industry to become larger. Industry growth create jobs which creates spending etc. etc., and when the taxes are switched back on, you now have more games companies paying taxes to the government. That "pays back" the money they lost by cutting taxes. It's only something you'd use in a nascent area, you wouldn't use it on an industry (North Sea oil exploration, say) that's as big as it's going to get for obvious reasons.