Basing business decisions on games tax breaks is a mistake, says Hamburg's mayor

Basing business decisions on games tax breaks is a mistake, says Hamburg's mayor
Craig Chapple

By Craig Chapple

May 12th 2014 at 11:30AM

Olaf Scholz hopes incentives come to Germany, but believes companies that look abroad for generous incentives are making 'the wrong decision'

Developers who move their business to another country to take advantage of generous tax incentives are making a mistake, according to Hamburg’s mayor.

Speaking during the opening of a new office for browser and mobile game developer InnoGames, when asked by Develop why game companies should set up in the area as opposed to countries with better tax incentives, mayor Olaf Scholz said basing a decision purely on subsidies would be wrong for their business.

He explained that building a business should be a natural process, and companies who based decisions around tax breaks and subsidies would “go bankrupt earlier than they think”.

Despite this however, Scholz said he supported the idea of games tax breaks in Germany, and suggested it "looks like" it could happen in the country.

“If you’re settling in a certain place because of tax reasons and because of subsidies that the government of the region is giving you, you are making the wrong decision,” he said.

"It must be the other way around. If you settle somewhere, it is to have the circumstances which help to develop the natural process."

He added: “I’m very much supportive of this idea [of tax breaks], and I hope there will be some success, and it looks like [it could be]. But on the other hand, no one should make a decision about the place to be because of revenues and because of taxes and subsidies, because then you will be bankrupt earlier than you think. “

Countries such as Canada have enjoyed generous games tax breaks for years, incentives that, for example, have arguably helped French developer and publisher Ubisoft grow into the industry giant it is today. The company houses thousands of employees at its offices in Montreal and Toronto, where titles such as Assassin’s Creed and Splinter Cell are developed.

In fact in September last year, Ubisoft announced it was investing some $373m into its Quebec operations over the next seven years to create 500 additional jobs, as well as expanding its mo-cap tech and consolidating its online games operations and infrastructure in Montreal.

The European Commission recently approved games tax breaks for the UK after years of campaigning from trade bodies UKIE and TIGA and a number of UK studios and industry veterans. It is hoped the move will encourage growth of local studios as well as entice further investment in the UK industry from overseas firms.

The approval of such a scheme, which was also renewed in France in April 2012, could open the door for countries like Germany, which does not yet have games tax breaks, to implement similar incentives in future.