TIGA publishes open letter to George Osborne over games tax breaks concerns

TIGA publishes open letter to George Osborne over games tax breaks concerns
Craig Chapple

By Craig Chapple

February 6th 2014 at 9:00AM

Delay puts UK behind global competitors, warns Richard Wilson

Industry trade body TIGA has published an open letter to UK chancellor George Osborne expressing concern over the long delay for games tax breaks in the country by the European Commission.

In the letter, the organisation's CEO Richard Wilson asked the chancellor for clarification and assurances on what the government is doing to expedite European approval for tax relief.

Games tax breaks were first announced by the government in the March 2012 Budget, and was intended to officially be enacted from April 1st 2013. The incentives were subsequently held up by the European Commission, which questioned whether the scheme was necessary in the absence of what it termed "an obvious market failure".

Wilson cites however the closure of Blitz Games Studios and the uncertain future of Activision studio The Blast Furnace as reasons why tax breaks are necessary for the UK game industry to compete on a global scale. He explained that tax breaks would generated 4,661 direct and indirect jobs, as well as generated £188 million in investment expenditure.

It was also claimed that one company, Eden Films, planned to open a new game studio, Codec Studios, but only if games tax breaks were approved. The firm is said to be willing to employ over 100 development staff to work on a new £30 million game.

You can read the full open letter from Richard Wilson to George Osborne below.

Dear Chancellor of the Exchequer,

I am writing to you in my capacity as CEO of TIGA, the trade association representing the UK video game development and digital publishing sector, to express the industry’s concern about the slow progress being made towards the implementation of Games Tax Relief in the UK.

The decision to introduce a Games Tax Relief in the March 2012 Budget was a significant and highly welcome measure for the UK video game industry and for the wider economy. The UK video game industry has been competing on an un-level playing field. Game developers in many countries receive tax breaks for games production. No such tax breaks exist in the UK and so the industry has declined. Research from TIGA shows that between 2008 and 2011, employment in the sector fell by over 10 per cent and investment by £48 million. The introduction of Games Tax Relief will reverse this decline.

However, the decision by the EU Commission in April 2013 to launch a formal investigation into the case for Games Tax Relief has prevented the UK video game industry and the UK economy from benefiting from this vital tax relief. TIGA has provided important data and information both to the UK Government (HM Treasury) and directly to the EU Commission, justifying the case for Games Tax Relief. TIGA’s evidence shows that the UK’s Games Tax Relief supports cultural products, is necessary and proportionate in design, and it achieves these results without distorting trade and competition within the EU. Despite the submission of this evidence, the EU Commission has still not indicated when Games Tax Relief will come into effect.

TIGA’s research showed that the introduction of Games Tax Relief should generate and safeguard: 4,661 direct and indirect jobs; £188 million in investment expenditure by studios; increase the video game development sector’s contribution to UK GDP by £283 million and generate £172 million in new and protected tax receipts to HM Treasury over five years. Tax breaks for games production will ensure that the UK remains at the forefront of video game development. Games Tax Relief will also help to rebalance the UK economy away from an over-reliance on financial services, towards a highly skilled, R&D intensive and export focused industry (many UK studios generate over 80 per cent of their turnover via exports).

This additional investment, new jobs and new projects risk being jeopardised by the on-going delay. Studios continue to close in the absence of Games Tax Relief. To give just two examples, the closure of Blitz Games Studio in 2013 which resulted in the loss of over 200 jobs and the recent decision by Activision Blizzard to engage in a consultation exercise with their staff at The Blast Furnace over the future of the studio, are to an important extent due to the lack of Games Tax Relief. Investment projects also hang in the balance.

To give one example, Eden Films has plans to build a new games studio, Codec Studios, and to develop a new £30 million video game. Based in central London, Codec will employ over 100 highly skilled development staff for a minimum of three years. However, this investment and others like it will not take place until the uncertainty surrounding Games Tax Relief is ended and the measure comes into effect.

Therefore, I would be very grateful if you could clarify what concrete action the Government is taking to ensure that the European Commission will give the green light for the introduction of Games Tax Relief at the earliest possible opportunity.

Given the importance of this issue to the health and future of the UK games industry, I will be making the contents of this letter public.

Yours sincerely,

Dr. Richard Wilson
TIGA CEO