UK game industry body Tiga has issued a formal response to the European Union's investigation into proposed tax breaks for British game developers.
The British game industry is looking to attract more companies and development talent by offering the same tax incentives as countries like Canada and France. Though tax breaks for game companies were originally due to be implemented on 1 April, an EU investigation into whether they were in fact necessary has put the plans on hold.
The investigation, launched on 16 April, expressed doubts as to whether British game development was in need of financial relief, explaining there was "no obvious market failure" in the UK videogames sector.
However, in a formal response issued today, Tiga outlined a four point proposal explaining why the tax breaks were needed.
The trade body argued that games were a "cultural activity on a par with animation and film production," two industries which both enjoy UK tax subsidies. "Video games are embedded in British life," explained Tiga. "33 million people play video games in the UK."
The organisation also outlined several statistics representing a decline in the amount of jobs available in UK game development and the amount of international investment:
"Employment in the UK development sector shrunk by 7% between 2008 and 2012 (conversely, the Canadian games industry grew by 33% between 2008 and 2011). [Meanwhile] annual investment was approximately 30 million lower in 2012 compared to 2008 [and] in 2012 the UK secured just 5% ($30 million) of the global total of investment in games.
"The UK's development sector has been hit by a brain drain with 41% of the jobs lost between 2009 and 2011 relocating overseas. Since 2007 the UK has fallen from 3rd to 6th place in the world in terms of global sales."
The organisation also raised concerns that the proposals would offer only a 25% nationwide tax relief, whereas areas like Quebec offer a more attractive 37.5%.
The EU investigation had also raised concerns that game tax relief (GTR) would disrupt competition between European nations, creating a "subsidy race" whereby each nation would try to negotiate stronger tax breaks than others. Tiga explained however that of the 27 EU member nations, only one, France, currently enjoyed GTR while the UK was the only country currently lobbying for tax breaks. The body said that rather than compete with other EU nations, GTR would give the UK game industry a better foothold on the global game market:
"GTR will not distort the EU's internal market. GTR is primarily an outward facing measure addressing competitors beyond the borders of the EU rather than between other EU Member states."
Tiga also complained that the current "cultural test" required to classify a game as "British" and therefore eligible for GTR was restrictive:
"The scope of the relief is curtailed (gambling games, advertising games, marketing and speculative expenditure on games are not eligible for the Relief)."
"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," said Jason Kingsley TIGA Chairman and CEO and Creative Director at game developer Rebellion. "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."