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The Almighty Buck United Kingdom Games

UK Video Game Tax Relief Cancelled 106

Posted by Soulskill from the you-just-lost-the-angry-video-game-nerd-vote dept.
Stoobalou writes "UK game developers have just been dealt a financial blow by Chancellor George Osborne in his first budget, which sees the coalition government scrapping the video game tax relief plans promised by Labour. In his speech today, Osborne simply said the 'planned tax relief for the video games industry will be cancelled.' According to the government's budget report, the cancellation of video game tax relief will save the government £40 million in the 2011-2012 financial year, and a further £50 million in each subsequent year."
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UK Video Game Tax Relief Cancelled More

UK Video Game Tax Relief Cancelled

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  • Because obviously, computer games are unproductive and a waste of time and taxpayers money... try telling that to Blizzard, EA, Rockstar and many other companies with billion dollar + profits.

    • Quite the contrary, videogames industry is as productive as any other and should pay taxes, possibly like any other

      (Yes, I am against subsidies)

      Just one more thing, for any economy to "work" you have to have a circular chain of producer-consumer, that is, I can buy a car from china but then china should buy something from me, or there should be a chain of buy-sell that closes back to me. If this is missing, the logic consequence is budget imbalance and collapse in the long run. (if the imbalance persist).
      Th

      • Re: (Score:3, Informative)

        by Fallus Shempus ( 793462 )
        The point is actually to attract these billion dollar+ companies into the UK; which would obviously be a boost for the UK economy.

        Maybe we should re-phrase the old adage - There's no such thing as a free market.

    • Well, they are a part of the economy, but in the not-so-high times we are living now, even politicians can think of many better places to send the hard-earned cash of the average taxpayer. How many people does the gaming industry employ, and what is the status of the health of the average company? Compare that to the rest of the economy and you may well find the reason why they did that.

    • Exactly how is any of this relevant to the UK? No, contrary to what many seem to think the UK is NOT a vassal state of the US. The only thing the two got in common is a language (barely) and a lack of taste buds that allows you guys to eat processed cheese and boiled meat.

      The current UK government is facing a debt crisis not dis-similar to the one in Greece but where that one was caused by typical garlic incompetence and blatant fraud, the UK one is caused because the country hasn't actually produced anyth

      • Comment removed (Score:5, Funny)

        by account_deleted ( 4530225 ) on Wednesday June 23, 2010 @03:31AM (#32662676)
        Comment removed based on user account deletion

      • A list of some of the things the UK apparently hasn't produced in years, which is relevant to both the OP and your post: http://www.giantbomb.com/united-kingdom/95-492/list-of-video-games-made-in-uk/35-9288/ [giantbomb.com]

        • A list which doesn't include Pitbull Syndicate (makers of Test Drive 4,5,6,Overdrive and LA:Rush, among others) or Midway Newcastle (who bought them out, made Wheelman, then went bankrupt).

          There are probably a few others missing too.

      • The video games industry is of value, it is skilled work. Perhaps the UK Government is confusing developing games with playing games.

        It makes sense to make the UK attractive to Video Game Companies, there is the technical skill. When development finishes the game brings in world wide revenues for a cost of pennies per copy. They are a fantastic export practically a license to print money.

        It might seem as if Video games are just fluff but looking at the rest of the software industry its largely a market defi

        • Re: (Score:1)

          by mdwh2 ( 535323 )

          So do all skilled jobs get tax relief in the UK? Does software development in general get a tax relief? I don't think so.

          Indeed, the argument they were making was not on the grounds of it being skillful, but on the grounds of it being a creative medium, arguing it should be treated the same as the film industry (which does get tax relief, AIUI).

          So what is going to happen to these skilled developers who are out of a job because other countries have made it more attractive for companies to do their developmen

          • Ireland might be one option Microsoft and Apple seem to see an advantage. Artists do pretty well too and theres no need to learn a second language.

            http://news.scotsman.com/politics/Taxbreak-loss-may-push-video.6377787.jp [scotsman.com]

            "Games makers warned they might be forced to leave Scotland as a result of the move.

            Manufacturers in Dundee have led the world when it comes to making hi-tech games. The previous Labour government had offered them tax relief they felt would increase spending on research and development in the UK by £457 million and create 3,000 jobs.

            The industry is estimated to contribute £1 billion to the UK's GDP each year.

            Colin MacDonald, from Realtime Worlds, which created the Grand Theft Auto series, said he was "hugely, hugely frustrated and disappointed".

            He added: "We would hate to move away, but we're a business. When Canada is 40 per cent cheaper and France has built-in tax credits, you're looking at saving millions a year. We have to take that seriously."

            Mr MacDonald said without the tax incentive many gaming companies would not be able to experiment and innovate, which would leave them falling behind in a global industry worth billions."

      • Re: (Score:3, Insightful)

        by Xest ( 935314 )

        "the UK one is caused because the country hasn't actually produced anything in years"

        Yeah, except the UK is still sitting at about the 5th to 7th largest economy in the world by manufacturing output and in the top 5 for service sector output. Contrary to popular belief, it's really only it's position in agriculture on the world stage that's declined.

        That's quite an achievement for a country that hasn't produced anything in years.

        No, Britain's problems were caused by it's reliance on the service sector in th

        • That website is practically push-polling; for example, it doesn't offer the chance to cut some of the £5 billion we spend on prisons (presumably by not throwing non-violent drug users into prison when they steal to support a habit, just a thought...)

          • Re: (Score:2)

            by Xest ( 935314 )

            Yeah, it's extremely simple but as I say, it demonstrates well the fact that if things get bad it's easy for Britain to make money.

            If the country was on the verge of bankruptcy, would saving a phenomenal £60bn at the expense of £30 a week less state pension really be that bad? It'd certainly be better than the alternative of increased debt payments and an eventual inability to afford any state pension at all! The point is it demonstrates that Britain has got plenty it can cut, and that's a good

        • Re: (Score:3, Insightful)

          by Hognoxious ( 631665 )

          Well you've pretty much summed it up, but I'll add that when it comes to having a big bloated public sector Greece and Spain (plus Belgium and France) are in an entirely different league. Jobs for life (many of which don't really need doing - just as well because they don't bother to do them anyway), early retirement with an index linked pension - and still they're on strike at the slightest excuse.

          Right now I see the ferries to the Greek islands are blocked by a bunch of hooligans. So there's hundreds of

          • Re: (Score:3, Insightful)

            by Xest ( 935314 )

            Yep, it did make me chuckle the other day when I saw the French were raising the retirement age to 62- poor sods, however will they cope?

            Here in the UK though if you've seen the comments from the unions their attitude is no different- according to the unions in the UK we can't make cuts and we can't raise taxes. I'd love to know what planet the unions are on, I'd love to know where exactly they think we're going to find £150bn without cutting or raising taxes. That's a common trait amongst unions it s

      • US made might be rare but not as rare as UK made.

        Where do you live? I suspect the story might be different from within the EU than within the US.

        US-made goods are actually very rare in the UK- I used to note that my disposable contact lenses and aftershave were some of the few things I owned that were made in the US, but the same type of lenses and aftershave are now made in Ireland and (IIRC) Switzerland respectively. Most things here are either made in the Far East (electronics, mass-produced plasticky stuff and the like) or within the EU. I suspect t

    • Re: (Score:2, Insightful)

      by ZeRu ( 1486391 )

      I don't that's an issue here, more like it's part of UK Govt's plan to increase taxes to get rit of its debt.

  • Not that bad for indie devs, at least (Score:5, Informative)

    by gravos ( 912628 ) on Wednesday June 23, 2010 @03:04AM (#32662518) Homepage
    Actually, an indie game developer in the UK [positech.co.uk] has said that this is not a huge deal (for him at least) because they lowered the business tax rate 1% instead, and this way he doesn't have to fill out any forms for his games business to get a boost.

    • Not that bad for non-indie devs either (Score:1, Insightful)

      by Anonymous Coward

      I work in the games industry too, and I'm not at all bothered by this tax relief being cancelled. It wouldn't have helped the average developer one bit, all it'd have done is give the big cats who run the companies even more money.

      The only argument that really holds any weight in this discussion is for the giant multinationals who might decide to relocate their UK studios elsewhere for tax breaks. Even if the big companies move, those people will probably still find jobs elsewhere anyway. If they stay, we'r

    • Re:Not that bad for indie devs, at least (Score:4, Informative)

      by cappp ( 1822388 ) on Wednesday June 23, 2010 @04:44AM (#32662938)
      The UK isn't the only one to make the move. Wisconsin recently decided to scale back it's tax incentives for the entertainment industry as reported http://www.gamepolitics.com/2010/06/16/wisconsin-scales-back-film-interactive-tax-incentives [gamepolitics.com] - seemingly largely based on their experience with the film industry

      While more aggressive incentives did manage to lure the Public Enemies production to Wisconsin, after doling out $4.6 million in tax credits to the production, it was estimated that the filming of the movie only brought in $5 million in local economic activity

      Seems the UK government was aiming for a wider ranging effect with it's budgeting as noted http://www.develop-online.net/news/35205/Tax-Breaks-the-deal-is-off [develop-online.net] -

      As part of his Emergency Budget, Osborne said that subsidies for developers first proposed by the previous Labour government in April will not come into force. He described the suggestion as 'poorly targeted' as part of a wide-ranging budget that outlined a number of cuts and tweaks to the economy designed to reduce the deficit and facilitate business growth. And despite saying "I want a sign to go up above the British economy that says 'open for business'," he made it clear that this will not be made by selectively offering tax cuts to specific fields such as games.

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      Not expecting any loss of sales/profits due to the VAT increase then?

      Either his prices will have to rise or his profit margins fall. It's loose-loose.

      • Er, loose margins means big profits, right?

      • Re: (Score:2)

        by tlhIngan ( 30335 )

        Not expecting any loss of sales/profits due to the VAT increase then?

        Either his prices will have to rise or his profit margins fall. It's loose-loose.

        Would be interesting to see what happens first - complaints about how UK/EU always "overpays" for stuff or how big the price changes are.

        Unlike most of North America, UK/EU prices build in all the sales taxes, so what you see is what you pay. Now, with the VAT going up, what will that do to prices? After all, I'm assuming retailers love doing the 199.99 thing

        • Re: (Score:2)

          by AmiMoJo ( 196126 )

          An interesting point you raise there. We VAT lowered to 15% for 12 months to stimulate spending for 12 months at the height of the crunch. When it went back to 17.5% a lot of retailers didn't pass on the increase, instead just letting it eat into their margins. Maybe they slowly pushed prices up over the 12 months to compensate.

          I don't think many will be willing to eat this further increase though. Many places have been moving away from round number prices lately anyway, perhaps due to all X.99 prices end u

  • TIGA CEO Richard Wilson said: "I don't belieeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeve it!" [youtube.com]

  • .. is that this is part of an "austerity" budget aimed at cutting £1.3bn of debt, including public sector pay freezes and an increase in VAT to 20% among other measures. In light of that losing £40-50M in "promised" tax cuts (promised by Labour party, recently out of power) for the gaming industry isn't exactly the worst problem the British are facing. Sounds like one of the more sensible cuts in fact.

  • And the other half of the story... (Score:5, Informative)

    by Hadlock ( 143607 ) on Wednesday June 23, 2010 @03:10AM (#32662554) Homepage Journal

    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.

    • That is up for debate. The initial reaction the global recession was to spend instead. Spending keeps businesses running, keep people earning wages and paying taxes and from that you can spend again.

      Stop spending and business stops, people stop collecting wages and stop paying taxes and then you can't spend.

      The UK is however not just facing the global recession but the fact that the UK has been slipping for decades. The recession has just made it clear just how rotten the UK economy is. It has/had a huge

      • Re: (Score:1)

        by Simmeh ( 1320813 )
        UK Plc is getting into more debt just to pay the interest on the existing debt. There is a massive black hole in the finances for pensions etc. This parliament is focusing on removing that structural deficit. Debt should peak by 2014. Public sector spending has soared this past decade. Notably, duty on booze and cigs hasn't been increased, so consumers will continue to drink their sorrows away. It's a gutsy move, but I think consumer spending in the long term will remain steady.

      • Stop spending and business stops, people stop collecting wages and stop paying taxes and then you can't spend.

        But keep spending money that you don't have and sooner or later the person you borrowed it from is going to get nervous about whether they're ever going to get it back. Or they might not have any more to lend.

        Just how is the economy going to recover if nobody has any money to spend?

        They could, you know, work and earn some? Presumably that's how it started, it certainly didn't fall out of the sky

      • Comment removed based on user account deletion

    • Re: (Score:3, Interesting)

      by IBBoard ( 1128019 )

      Chancellor George Osborne is doing what all countries should do in that situation but are afraid to do, due to the unlikelihood of reelection

      But the advantage that he has is that they're part of a coalition, so it isn't just his party that takes the blame. In a way, this coalition has its very good points. There are almost certainly some of these measures that wouldn't have been taken without it, even if they were necessary.

    • Tax handouts to the entertainment industry

      It's not a handout. It's a reduction in taxes.

      don't help balance the budget.

      If the companies in question would otherwise relocate elsewhere then they do, because 39% of something is more than 40% of nothing.

      • Re: (Score:3, Insightful)

        by drinkypoo ( 153816 )

        It's not a handout. It's a reduction in taxes.

        In practical terms, there is no difference.

        If the companies in question would otherwise relocate elsewhere [...] 39% of something is more than 40% of nothing.

        Propping up failing business is not the answer. Allowing businesses to fail in a timely fashion so that the results are not magnified by keeping them going up until the last, catastrophic minute only causes further financial fallout.

        • It's not a handout. It's a reduction in taxes.

          In practical terms, there is no difference.

          Rubbish.

          In one case, there's a net flow of money out from the government. In the other there's a net flow (even if the magnitude is reduced) towards it.

          • In one case, there's a net flow of money out from the government.

            Uh, no.

            In one case there's a net flow of money into government. In the other case, there's a net flow of money into government. This will continue to be true until government exceeds 100% efficiency, i.e. forever and ever. What's the difference between getting a rebate and not paying taxes? Nothing as far as everyone but the person either getting the rebate or not paying the taxes is concerned.

    • Re: (Score:2)

      by cappp ( 1822388 )

      The whole European continent is over-leveraged on debt and Britain is doing their best to make an example by balancing their budget

      Hardly the only ones though. France and Germany jointly announced similar budgets, for instance France committing itself to

      cut 45 billion euros from the nation's budget and raise the retirement age to 62 years... "We've made a commitment to bring down our deficit from 8 to 3 percent by 2013, and we will concentrate all of our efforts on it."

      as noted at http://www.foreignpolicy.com/articles/2010/06/17/couples_retreat?page=full [foreignpolicy.com] As for Germany, http://www.france24.com/en/20100608-merkel-rolls-out-unpopular-a [france24.com]

    • Increasing taxes and cutting spending is the exact opposite of what you want to do if you want the economy to grow.

  • However.. (Score:3, Insightful)

    by severn2j ( 209810 ) on Wednesday June 23, 2010 @03:11AM (#32662564)
    They are cutting Corporation Tax, employer contributions to National Insurance and (if I read correctly) new start ups wont have to pay NI on the first ten employees they hire. So rather than provide a boost for that one industry, those breaks are helping out all industries, including the games industry. Makes sense to me.

    • Re: (Score:2)

      by Zeussy ( 868062 )
      What I like is how they say, will save the government x amount of money. But they have not spent it. They have not created that money, they just are not going to spend like they proposed. If there was a current games relief tax and they stopped that, that would be saving them money. :S
  • Bad news for the video games industry but it's not a total disaster. They get to benefit from a drop in corporation tax, and if they are smart, they'll take advantage of the 50K tax break for setting up a business outside of the SE hot zone.

    All anyone such as Rockstar needs to do is open a new software house in Bradford, adjacent to and working with Rockstar Leeds [rockstarleeds.com] for example and they get a reasonable tax break.

    So while they've been kicked in the teeth, there are still some workable benefits to be h

  • Corporate & Business Tax cuts (Score:3, Interesting)

    by Manip ( 656104 ) on Wednesday June 23, 2010 @03:22AM (#32662622)

    Corporation tax is being dropped 1% every year from *25% (*current) down to 24% making it the lowest tax of its kind in the Western world.

    Small businesses will also see a 1% drop in the rate of tax (between 300K-1.5M). Small businesses also have to start paying NI at a higher threshold, which means the first few employees are now much cheaper.

    So, yes, this is a blow - but it might actually not hurt the small games industry at all and only hurt the big industry for a few years until we get down to that insane 24% corporation tax.

    • No, it's not the lowest tax of its kind in the world. A number of countries have lower rates, including neighbouring Ireland with 12.5%. Needless to say Northern Ireland has been looking for a similar rate within the UK as a whole or a special rate just for NI.

    • Main rate CT is currently 28%, small companies rate is 21%. Marginal rate applies between 300k and 1,500k, though the thresholds depend on how many associated companies you have. The 24% rate won't be the lowest in the western world, though it will apparently be the lowest in the G20. The drop in CT rates is good, as is the drop in NI, though it's balanced by the drop in capital allowances from 20% to 18% for main pool expenditure and 10% to 8% for special rate pool expenditure.

      Why yes, I do happen to be

  • The UK has a huge public debt (and growing) at the moment because of lack of fiscal probity in the last years of the previous government and because a lot taxpayer's money was used to "saved the banks" (the same banks that in the years before that payed billions in bonuses to traders).

    The Chancellor (i.e. the Government Minister that takes care of Finances) has just announced a new budged where cuts are all over the place and Value Added Tax (i.e. Sales Tax) has gone up, all this to try and control the publ

  • But what if that cancellation got overruled? Then the headline would say:

    Tax relief cancellation overruled.

    tax. Oh no. ...relief. Oh yes. ...cancellation. Noooo. ...overruled. Yessss.

  • Hmm... it doesn't roll off the tongue very well...

  • Massive U-Turn? (Score:2, Interesting)

    by phasiclabs ( 1840248 )
    I'm an indie developer, and I happened to be at the State of Independence conference in York 2 months ago.

    Ed Vaisey, now the Creative Industries Minister in the Department of Culture Media and Sport was a keynote speaker, and actually took time out of election campaining to be there.

    The general gist of what he was saying was that should the Conservatives get elected, then he would be pressing for tax breaks for UK game developers (he also claimed the idea of tax breaks was partly his idea, but that La

    • Re: (Score:3, Insightful)

      by Grantbridge ( 1377621 )
      Just because the minister for the Department of Jam wants more jam subsidies does not mean that the Chancellor will pay for them! I don't think he has lied or misled you, he just doesn't have the clout to persuade Osborne to cut the health budget and pay for games instead.

  • The British elected the Conservative Party to office, and they began by cutting expenses and raising taxes in a time in great need. How novel. Here in the United States, we gave the Republicans 8 years in control of the government, at least 5 of which were spent owning both houses of Congress as well as the Presidency---and we ended up with a big deficit. We even had a surplus to begin with! In fairness to Bush, he did try to reduce costs on Social Security, but on every other issue it was clear that th

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