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OPINION: European Commission shoots down tax incentives for U.K. game industry, but its logic is absurd

on 19 April 2013

The ever-waging fight for tax breaks in the U.K. game industry is known all too well by developers. The sheer opportunities that would blossom from offering tax breaks to developers are overwhelming. But the idea has been dealt another smack in the teeth with the European Commission--the U.K.'s analogue to the U.S. Congress--deciding to do an in-depth investigation into the proposed tax relief plan.

The proposed plan was first announced in December 2012 by the U.K Treasury and publishers and developers were excited at the prospects of what the tax breaks could bring. The tax relief plan from the U.K. government consists of a set of points that game developers could earn through certain actions. For example, if 75 percent of a game was set in the U.K. then its developer would gain a point, or points would be awarded if half of the voice acting was recorded in a U.K. studio. If the company gained enough points then it would be entitled to tax break benefits, but now the European Commission is blocking the plan. Given what the game industry could gain from these tax breaks, this is utterly absurd.

Imagine: more jobs, more support for developers making the great games we play each and every day, and more time for developers to make fully complete and more bug-free games. Instead, the European Commission argues that giving tax breaks to U.K. developers would be an "unfair advantage" over the rest of Europe, potentially kicking off a continent-wide tax break race. But is that really a bad thing? Developers all across the European Union could use tax breaks to kick-start an enormous boom in the games industry--better games made faster and cheaper, with developers no longer hamstrung by reckless taxation.

For evidence of tax break benefits, look no further than Canada. Our neighbor across the pond managed to benefit greatly from tax breaks it gave its own game industry. It has done nothing but good by allowing the Canadian game industry to bring new studios and start-ups into the country that produce more and more high-quality games. In turn, the gaming "stimulus" benefits the Canadian government by increasing livelihood and creating jobs for Canadian citizens.

As a student about to finish my final year of University in 3D animation and modelling, it infuriates me to no end. It makes me want to bow out and go elsewhere. I remain hopeful that the plan can be pushed ahead, but this will only happen if the nonsensical allegations of the European Commission are put to rest. If the European Union's executive body can't see the benefits of giving U.K. game developers tax breaks, working in the game industry is a scary prospect.

Joaquin Almunia, European Commission Vice President, said: "The market for developing video games is dynamic and commercially promising," before adding, "It is not clear whether the taxpayer should be subsidising this activity. Such Subsidies could even distort competition."

It's fair to avoid putting an extra burden on taxpayers, but Almunia is forgetting a simple rule of economics: competition creates innovation creates creativity. Furthermore, giving tax breaks to U.K. developers would catalyze job creation and help make the U.K. a stable ground for investments from top-tier games studios.

Joaquin continued by stating there is "no obvious market failure" demanding such a plan. There might not be, but Canada has shown us the benefits! The game industry, valued at over $65 billion annually, is one of the biggest industries in the world. Why not help it grow even bigger? Help it flourish and create many awesome new opportunities that will only continue to bring benefits on a larger scale. New studios could form far easier and grow without a financial noose wrapped so tightly around the neck. Studios wouldn't need to close down left, right, and centre. Worries about where the industry is going could be put to rest.

Association for U.K. Interactive Entertainment boss Jo Twist has fired back at Almunia's remarks, stating, "We are extremely disappointed that the European Commission has decided to open an in-depth investigation into production tax credits for the U.K. games industry."

"We believe this support is crucial in opening up the opportunity for developers to make culturally British games, but also a vital incentive for development studios and large multinationals to base their development in the U.K. and nurture the talent here. We are still confident of having the scheme."

This year alone has seen many studios fall, some big and some small. A tax break plan could be just the financial injection that the U.K. game industry needs right now. Is the European Commission scared of the U.K. becoming a video game powerhouse? Why run from the obvious benefits, seeking only to poke holes in a plan of proven economic merit?

My feelings on the issue are clear, but I want to hear what you think. Should the U.K. government create tax breaks for U.K. game developers? Is the European Commission wrong to put their foot down, or is taking a second look at possible holes worth the trouble? Sound off in the comments below, and stay tuned to PSU.com for your fix of PlayStation politics.