A Develop report states that the European Union is likely to lift a ban on tax breaks for the video game industry.
The EU had granted a cultural exemption for video games in 2007, which allowed individual members to extend tax breaks for games development if they chose to do so. This exemption led to countries, such as France, granting strong breaks to companies developing video games like Ubisoft. That exemption ended on January 1, but due to resistence to extending it, it was not renewed by the European Commission.
This has caused some companies to publicly speak out and threaten to move to Canada’s Quebec and Ontario provinces, where tax breaks are plentiful.
The EC’s competition directorate-general, speaking in response to Scottish MEP Ian Hudghton, noted the exemptions’ importance.
“I fully agree with you that games constitute an important sector of creative industries in Europe and can reassure you that the Competition Directorate General of the Commission is not considering plans to halt an existing tax relief on the games industry… With regard to possible relevant plans of Member States for the future, each project will continue to be assessed by the Commission on its merits under the State aid rules of the Treaty.”
Despite the exemption, the United Kingdom refuses to further entertain the idea of tax breaks despite housing an estimated 40% of the region’s games development. Tax breaks for the industry had been an election mandate for the Liberal Democratic party in the UK, but the LD/Conservative coalition government tabled them in their budget.
Analysis: Forgive this libertarian American for his ignorance, but to me, it seems absolutely appalling that a wider “government” can set tax laws for what I would believe to be soverign nations. This is literally how this issue has gone:
France: “We would like to give tax breaks to drive business.”
EU: “No. Someone else doesn’t like it.”
If this were telling Greece how to run their economy, that would be one thing because Greece’s economy has collapsed. But telling other solvent nations that they can’t extend a tax break because someone else—possibly the UK?—complained is apalling to me. While the stated reason is going to be that some countries giving breaks while others do not is anticompetitive, this is far from an environment that’s going to create a monopoly. The worst case scenario is where the EU’s policy risks costing France Ubisoft, only the largest publisher in Europe, who has already moved developers to Canada.
Thank goodness better heads prevailed. Now hopefully, Dr. Wilson of TIGA can continue to slap some sense into England’s government.