AN INVESTIGATION into the proposed introduction of tax reliefs for the production of video games has been opened by the European Commission.
The 25% tax relief on a maximum of 80% of the production budget of a qualifying game was announced as part of the chancellor’s Budget in March and was due to commence on 1 April.
According to the EC, there is no obvious market failure in the UK, and such aid is not necessary. The commission raised concerns that limiting expenditure for tax reliefs to goods and services used or consumed in the UK could be discriminatory, and the possibility that reliefs of this kind could fuel a “subsidy race” between member states.
It also queried whether the proposed criterion that the games be ‘culturally British’ could lead to undue distortions in the market.
Joaquín Almunia, EC vice-president in charge of competition policy, said: “The market for developing video games is dynamic and commercially promising. It is not clear whether the taxpayer should be subsidising this activity. Such subsidies could even distort competition.”
TIGA, the association representing the games industry, expressed disappointment at the commission’s announcement. Chief executive Richard Wilson warned a prolonged delay to the relief could “jeopardise much-needed investment and job creation in the UK games industry”.
He said: “This is a delay, not a defeat, in TIGA’s five year campaign for games tax relief. Both the French Video Games Tax Relief and the UK’s Film Tax Relief were also subject to an investigation by the EU Commission before they were introduced.”
“TIGA strongly believes that video games can be cultural products. Yet there is a market failure in the supply of culturally British video games. Many games are made overseas because of the tax credits that are available and so many culturally British elements are lost or replaced by those of the nation making the games. Of the games that are still being made in the UK they are increasingly being made with an international or Americanised theme.”
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