Development body criticises Alistair Darling’s VAT cut, saying that income tax cut would have been better
TIGA, the trade body for game developers, has become the latest voice to slam the government’s recent announcement of tax changes in an effort to tackle the current economic crisis.
CEO Richard Wilson stated: “The economy has already received a major monetary stimulus. Base rates are at their lowest since the 1950s and sterling has declined by approximately 25 per cent against the US dollar. However, at a time when the economy is spiralling deeper into recession, unemployment is at an 11 year high and rising, house prices are falling faster than during the early 1990s property crash and small businesses are suffering from a lack of credit, a fiscal stimulus is a necessary but insufficient approach to take.
“The Bank of England will need to reduce base rates still further if we are to stave off the worse effects of the recession.
“The 2.5 per cent cut in VAT could help to stimulate spending, but will also cause some logistical and administration problems for businesses. It would have been better if the Government had cut income tax and raised personal allowances.
“The Government’s plan to guarantee bank lending of up to £1 million to small businesses, to allow small companies to spread out their corporation tax, VAT and national insurance payments and to create a £25 million fund to help businesses that are having difficulty accessing finance are all welcome proposals. However, the Government’s intention merely to defer the increase in small business corporation tax from 21p to 22p to 2010/11 is disappointing. Small business corporation tax should not be increased.
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“While the Government’s short term approach to the economic downturn – a fiscal stimulus – makes sense, its long term strategy is quite wrong. Increases in national insurance contributions add to the burden of taxation and deter employment growth because they increase the cost of employment. The planned cuts in allowances and the new 45 per cent income tax rate will raise relatively little in revenue and sends out the message that the UK will be a higher tax economy in the future. This is the wrong message.
“A recent Tiga survey showed that one third of games developers in the UK already believe that the burden of taxation is holding back their businesses. The UK’s long term strategy should be foster a low tax economy in order to enable owners and managers to grow their businesses, invest in R&D and spend more on training.
“The Government should also go further in reducing public spending in order to get the public finances back on a sound footing, rather than raising the burden of taxation. Even on the Government’s rosy forecasts, the current budget will not be balanced until 2015/16.”
A comment I'll later regret? I regret commenting all the time, so what the hell :)
Frankly, these releaases are crap, and anger me. Nobody sane and with an economic head would agree with this (and I contribute over £1m to the British economy in TAX each year right now), unless you get hype'd up by the 'government is evil' emotice clap-trap.
I'm known as pretty right wing, but even I would side with Labour versus TIGA on this (and TIGA are about as conservative as they could be right now).
The economy needs people to spend their money. We need that now. We need people out there feeling confident, spending money for Christmas, and stopping the companies on their high streets from suffering declining sales, and ensuring their suppliers don't suffer either by getting paid. Cutting income tax (which I'm in favour of in general) is not appropriate in this case... It will not guarantee additional spending (which is what the economy needs) on the high street - people may simply choose to save more money. Reducing VAT _WILL_ put £12bn on the high street - its simple mathamatics.
Cutting VAT ensures that this investment happens at the right place and where it's really needed, not simply in your bank account, where you might choose to save, given the current climate.
I totally agree that the 45% tax is silly (I'm hardly objective, it will cost me thousands), but as one of people that will pay this rate, I simply don't care because I can afford to suffer it (and no other HNWI's will care either), so please don't fight for us! I'm hardly going to move to Monaco in my outrage :)
I believe in cutting taxes, but now is NOT the time.
IAnd the NI increase? Its irrelevant - it's 0.5% for god's sake... even a company with over £1m in salaries like us, will only pay another £5k a year. And employees will not notice either.
The credit crunch is now mostly perception, and simply needs byyer confidence, except for those truly poor souls that have lost their jobs or houses... They are the ones we should pray for - especially the small business that are ****ED. ****ED for Christ's sake. This is not something to simply voice our opinion about, and jump at the chance for some media coverage in a press release. It's HUGE for some individuals.
Constant negativity (such as the press have mouthed non-stop for months) make those people feel even worse, and only go towards lessening confidence even further - how the hell does that help?
For the rest of us it makes no difference, UNLESS, you stop spending your money, Go out and spend - spend, spend, spend. That is what our economy needs right now. And don't sell anything... certainly don't sell your house for a few years.
Paul Wedgwood
Owner/CEO
Splash Damage Ltd
http://www.splashdamage.com" onclick="window.open ( this.href ); return false;" class="comment_url" >http://www.splashd...e.com
Winner - Best Independent Developer, Develop 2008
"Reducing VAT _WILL_ put £12bn on the high street - its simple mathamatics."
Are those mathematics not too simple? This £12bn will be lost in shops rounding off prices.
And while just a few grant may appear like 'piffle' compared to the millions that studios are working with, aren't the margins just that tight that they will cause a problem.
I'm not sold on this budget and I'm more left-leaning than most. It's just too weak. If you're going to do this plan, then take it in a more extreme fashion and make the VAT drop even further so it actually makes a difference, tax the rich even more, tax businesses more but do it intelligently (perhaps let truckers have cheaper petrol and the like) and whack up booze, tabs and petrol.
Otherwise it just won't make any difference since these are meant to stop the depression rather than weather it. If that's the case, take the right-wing option and come out of the other end of the depression in a fit state.
Yes... Exactly. That's the whole point. Nobody cares that they'll save £4 on a £150 pair of shoes... It makes no difference to the shopper. However, and this is the _real) key, retail outlets will not adjust their £9.99 prices just because VAT has dropped 2.5% - the logistics are too complicated (as Richard Wilson rightly notes), but what he fails to see is that this is not the goal.
What will actually happen is that ALL shops will now make 2.5% higher earnings before interest and tax on every transaction That's a huge amount of net profit (pure cash) that they don't need to send to the government, or any other supplier. It's exactly what they need to improve profit and cashflow, and ensure everyone else starts to get paid.
This is a definite month-on-month increase of 2.4% EBIT for all retail, at least until consumer groups pressure them to pass on the tax cut to shoppers (which never happens anyway - do you think a shop really values any product of £9.99, net of VAT at exactly £8.50? Evething is rounded, regardless of tax, for the most attractive price point). They'll just be collecting £8.68 now, instead of £8.50. Why would we want to give the money to business, instead of the man on the street? Because it's the High Street that is the foundation of our economy.. They are the ones that provide the revenue for almost every other business in the country (landlords, utilities, manufacturing, distribution, marketing, and the many staff emplyed in getting that £8.50 product to you).
What happens if you don't place the money on the High Street? That entire chain starts to colapse.
Paul.
Paul, since you are not a member of TIGA anyway, and choose not to help other devs at all, for some bizarro 'paulworld' reason, you don't get a say in what is released by the organisation.
A rise in the basic allowance would have given money directly to those who need it the most. The VAT modifications will cost business to re-engineer their systems. (Most accounts packages are utter **** and need an engineer to be called out to mod the VAT rate at great expense.) People are feeling poor and worried and that's what needs to be addressed.
There would be less transactions being made so they're just getting a slightly bigger share of a lot less.
Simple, in every meaning of the word, mathematics :P
Government doesn't see past facts and numbers shocker!
@Jono: To be fair, Splash Damage was/is a supporter of the Games Up? campaign - and if not supporting something meant you weren't allowed to criticise it, politics itself would implode, right?
Let's at least be sensible!
Yes, not sure what you mean by 'don't help other developers at all'. This year alone, I've lectured at GDC San Francisco, Develop Brighton, the London Game Festival, and the recent Nottingham event, held BAFTA surgeries for students, and sponsored Games Up? financially (rather than just 'supporting it' like many others else), and there are several other SD guys that have lectured and taken part in events for the industry too.
I don't have a problem with TIGA making representation to Goverment and commenting on policy.
I think I do have a pretty big problem with TIGA making broad brush Daily Mail-like statements about MacroEconomics. It's not going to make TIGA any friends and TIGA doesn't have the authority on the subject to make any comment meaningful, beyond the impact of policy on members.
Let's leave the big stuff to the Institute of Fiscal Studies et al, eh?
Better, surely, to stick to the remit and to concentrate on lobbying Goverment effectively and commnicating efficiently how Devs can access the Goodie Bag which HMG has aimed specifically at the SME sector?
