A Freedom of Information Act investigation into Games Tax Relief
Sarassin LLP is in the process of conducting a Freedom of Information Act investigation into submissions made to government by sections of the video games industry in relation to the proposal for video games tax relief (also known as “GTR”).
This investigation was prompted by the story published on Develop Online on the 24th June 2010 entitled “Global Publisher sabotaged UK games tax breaks”. This story has since been removed from the Develop online site, but not before it was passed around the world.
This page sets out the findings so far.
The following table sets out in chronological order the key events leading up to (and following) the withdrawal of proposed games tax relief by the coalition government, together with links to the relevant documents.
The key time period is the period starting on the 30th June 2009, when the UK Department for Culture, Media and Sport issued a formal request to the video games industry to provide concrete evidence and proposals for games tax relief, together with the contrasting responses of TIGA and ELSPA/UKIE in August and September 2009.
Just to let you know that tax breaks were discussed when ELSPA met with Stephen Timms last night. Paul Jackson told the minister that if a UK tax break was very specific, tightly defined and targeted at a certain type of game then they would support it. However they would be very unhappy at any suggestion that all games are cultural products because of the international trade problems we have already discussed. […]
(“AMSD” is the EU “Audiovisual Media Services Directive” which applies essentially to films and television. In 2008 publishers were lobbying hard to keep video games outside its scope, on the basis that games are “software” not “films”.)
More on this directive
Evidence Required:
1. Consideration of appropriate relief threshold. For example, the French system has a threshold of 20% relief on eligible costs. Is 20% an appropriate amount to incentivise companies to make games in the
2. Evidence setting out likely impact on the video games market of introduction of such a measure (assuming the appropriate eligibility threshold). For example, is it likely that a significant number of games companies will apply for/receive this relief? Will the availability of this kind of relief affect/ be of benefit to the console or online only market in particular? How? Will it disadvantage any companies in particular.
3. Evidence of the likely cost to Government, assuming qualifying criteria similar to the French scheme (eg. minimum spend criteria; amount of spend on “creative elements”; eligible content – no gross violence and appropriate cultural context); appropriate eligibility threshold).
4. A strong case for the cultural value of video games, similar to the case submitted to the EC in support of the French relief.
ELSPA issues a press release on Sion Simon’s public invitation for evidence and support for tax breaks, reported on MCV under the title “ELSPA responds to DCMS letter”. The Director General of ELSPA is quoted as saying: "This is the culmination of a long campaign to get games recognised alongside film as a major contributor to the UK’s economy and culture".
The Director General of ELSPA is quoted as saying: “…. Endlessly calling for tax breaks is not enough. What is obvious is that hard evidence has so far been very lacking so the Minister has now asked ELSPA to help further the debate by furnishing that evidence. This, of course, we are happy to do."
(The full submission can be found at TIGA's website for a charge)
The note of the meeting taken by a DCMS official states that: "ELSPA expressed concerns that a tax credit would not help the industry and are worried about what it would mean for the future. They are worried that the WTO may reclassify the games industry from software to cultural if tax credits are approved. They would like a study to take place before the implementation of tax credits to assess the impact. ELSPA feel that support for education … would be more helpful to the industry …"
ELSPA considers that this note is not an accurate record of what was said at the meeting. However, it repeats the points made in ELSPA's written submission of the 2nd September 2009.
MCV publishes a story entitled “ELSPA disappointed by tax omission” quoting the Director General of ELSPA as saying "It is disappointing that the Chancellor has rejected the case for tax breaks for 'culturally British' games. Nevertheless we believe that the Government overall recognises the importance of our sector in creating wealth and securing jobs. We must now move on. We must build on the strong support Government has shown us elsewhere and, as the general election approaches, continue to develop and seek the adoption of our policies by all three major parties."
The Director General of ELSPA is quoted as saying: “… we are extremely disappointed by the outcome of today's Budget. ... Our industry will be rightly puzzled as to how tax breaks can be lauded before an election, only to be seen as 'poorly targeted' and scrapped just six weeks later. …Therefore in the absence of tax breaks it is the essential that the government work with our industry to ensure that the policies which we have outlined - such as addressing the skills gap and better access to R&D initiatives - are implemented."
MCV also publishes a story entitled “ELSPA reeling from games tax u-turn”, quoting the Director General of ELSPA as saying “… in the absence of tax breaks it is essential that the government work with our industry to ensure that the policies which we have outlined – such as addressing the skills gap and better access to R&D initiatives – are implemented."
Link to MCV story
ELSPA has told GamesIndustry.biz that it will not go on a "witch hunt" to find a publisher accused of sabotaging planned tax relief for the UK games business. A report by Develop Online has suggested that a global publishing company pressured the UK government into dropping planned tax breaks for the local industry, fearing unfair competition from the UK. The report does not name any sources or the publisher allegedly involved.
While not all developers and publishers agree that tax breaks are necessary for the industry, ELSPA director general Michael Rawlinson - who has been at the heart of lobbying and negotiations with the government and MPs - said today that at no point has the organisation comes across such an anti-tax relief agenda from a publishing company.
"We have no idea where that has come from, it's totally left of field and has certainly not been on the agenda of any of the many political briefings we've been involved in," he said. "That's not to say it's not true, but we've been discussing tax relief for some time, and lobbying solidly. It's something we haven't come across".
As an organisation that represents the interests of the publishing community, Rawlinson said ELSPA would look into the rumours, but would not pressure members without evidence.
"We'll certainly make enquiries but it's highly unlikely anyone will admit to lobbying against tax relief for the industry. If we see some hard evidence then we'll listen to that, but there's certainly not going to be a witch hunt." ...
One paragraph of that note has been withheld, claiming that “it is exempt from publication under section 43(2) (would, or would be likely to, damage the commercial interests of ELSPA) and 35(1)(a)(formulation or development of government policy).
This paragraph has since been provided by ELSPA.
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