The question of tax breaks for the games industry in the UK – and Scotland specifically – is one which has ground on for the last several years.
If you’re not familiar with the issue, it concerns the fact that several countries (most famously France and Canada) around the world offer game development studios quite significant reductions in their tax when it comes to developing new games. This helps them to work on new ideas by reducing tax payments during the development phase. The idea is to encourage developers to work on original ideas thereby creating intellectual property – their own games in other words. The return for this investment is a healthy community of games companies with strong intellectual property that offers far more long-term benefits than simply ‘working for hire’ (i.e. building someone else’s games).
Recently there was a sighting of this issue in The Sunday Herald, which pointed to the Irish government considering a five year ‘tax holiday’ for game developers in an effort to ‘woo’ Scottish companies such as Denki and Realtime Worlds. This story was then picked up by Gamasutra and Joystiq, amongst others.
On Wednesday, I attended the Scottish Parliament along with various other members of Scotland’s gaming community to explain the issues to Members of the Scottish Parliament in a bid to raise awareness of the seriousness of the issue for the long-term future of our industry.
Would tax incentives be useful to developers in Scotland? Yes, of course. They’d help us to build upon our success to date and continue to lead the interactive entertainment sector in new directions.Mostly though, they’d help the many talented development studios in Scotland make the incredibly difficult transition from Work For Hire to Original Games.
Having recently led Denki on that journey myself, I appreciate better than most people just how difficult it is to take a games company down that route. It took us two years of planning and juggling incompatible priorities to get Denki off the life-support-system of Work For Hire, and it will still be a while yet before we’re truly at a stage where we can disconnect the drips and let the patient home.
I think it’s fair to say that we have achieved this transition despite the current UK tax system – not because of it. And I would like to see Parliament recognise the difficulties, and the value of creating this new landscape within the gaming sector by making the process slightly easier for those trying to do it in future.
Mostly though, I don’t want tax reform based on a fear of losing the industry from Scotland. I’d much rather tax reform for games developers came from recognition of the long-term value which the interactive industry will bring to Scotland as a whole if it is encouraged.
It’s also worth pointing out the good work the Scottish Parliament has already delivered in recognising and supporting the interactive sector. Dare to be Digital – the best finishing school for new game developers yet created – has received government funding, while the new Creative Scotland organisation has stated publically that the games sector is eligible for support and funding. Anyone who remembers the Scottish stand at the old E3 event will know that support has always been there; however, while the current tax system remains in place it is little more than fighting the fire while feeding the flames.
But is Scotland likely to lose any of its flagship developers? I can’t speak for anyone else, but I know how difficult it was to move Denki two floors down in the same building, so the logistics of moving an entire studio to another country, relocating staff and continuing with a project in mid-development are not to be underestimated. From Denki’s point of view, we fully intend to carry on doing what we’re doing right here in Dundee.