UK game trade body Tiga has issued its formal response to the European Commission on its tax relief investigation.
Game industry tax relief was expected to be available to developers from April 1st this year, but on March 20th the scheme was delayed by the EU.
A month later the European Commission announced that it would be launching an in-depth investigation into the proposals, citing its doubts as to whether the UK game industry needed them.
Tiga has now submitted its formal response to the investigation, highlighting four key arguments as to why games tax relief is necessary for the UK game industry to thrive.
It argued that the game development process was a cultural activity “on a par” with animation and film production, developed by people from a plethora of different professions.
The trade body also said that video games are “embedded in British life”, and are played by 33 million people in the UK.
Tiga’s second point was that games tax relief was necessary to stop the UK game industry from shrinking further and to encourage developers to create titles based on British themes.
It stated that many UK games were developed with an Americanised themes, with culturally British elements “eliminated”. It claimed tax relief would help address this problem by enabling more developers to self-publish and keep a British feel in their games, and incentivise more risk by reducing the cost of development.
The UK “brain drain” was also highlighted in the report, citing figures revealing the UK sector had shrunk by seven per cent between 2008 and 2012, while more than 41 per cent of jobs lost to the UK game industry were from developers relocating overseas.
Tiga’s third case for tax relief was that it would not distort the EU’s internal market. The EU does not allow its members to provide state aid by law, although France’s tax breaks were previously recognised as an exemption in 2007, and the scheme has since been renewed.
Tiga argued that only two EU countries had received or proposed games tax relief, and that its primary goal was to address competition from countries outside of the EU, such as Canada.
Lastly, the trade body identified how the cultural test placed positive restrictions on developers looking for tax breaks, given that only culturally British games could benefit from the measures, and that gambling and advertising games, marketing and speculative expenditure were not eligible for relief.
It also stated that tax breaks were limited to 25 per cent, compared to Canada provinces such as Quebec, which had rates as high as 37.5 per cent.
“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,” said Tiga CEO Richard Wilson.
“The EU Commission should now seize the day and approve the introduction of the UK’s games tax relief.”
Tiga chairman and Rebellion CEO Jason Kingsley added: “The culturally British elements of video games are often eliminated from games that are developed in the UK in favour of international or Americanised themes. GTR can reduce this tendency by promoting culturally British video games. Firstly, GTR will enable more studios to self-publish and develop British themes in their games.
“Secondly, GTR will reduce the cost of games development in the UK and so could encourage global publishers to take more of a risk on developing games with a British personality. Tiga strongly recommends that the EU Commission approves the introduction of GTR in the UK as soon as possible.”