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UK game devs start to claim 'culturally British' tax breaks
Developers across the UK are donning their Union Jack dresses and piling up on their tea stocks, now that they claim the long-campaigned for "culturally British" tax breaks. We jest of course, but as of this week, qualifying studios are able to claim up to 25 percent on 80 percent of their production costs, a huge change that trade association TIGA believes will lead to £188 million (around $312 million) in additional investment into the national games industry over the next five years. The still bizarre fulcrum in all this is the Cultural Test itself, which was a sticking point for the European Commission who sees it as vital to the aid. As the EU Commission put it in March, "the proposed cultural test ensures that the aid supports only games with cultural content without leading to undue distortions of competition."
Georgia passes law giving $25 million in video game tax breaks
Georgia governor Nathan Deal today signed a bill that will grant local video game developers $25 million in tax credits, the Atlanta Journal-Constitution reports. The legislation, part of House Bill 958, will give tax breaks to Hi-Rez Studios, Tripwire Interactive, and other Georgia-native development studios. The state previously courted developers in 2008 with the similar Entertainment Industry Investment Act, which provided a 20% tax credit to local film, TV and game development studios. [Image: City of Atlanta]
European Commission approves UK games tax breaks
The European Commission announced it's approved the UK's long-sought gaming tax breaks, paving the way for the government to start finally implementing relief for game makers in the country. Almost a year after raising doubts over the necessity of the relief, the EU executive body concluded its investigation and gave the measure the go-ahead. "Out initial doubts have been dispelled," said Commission VP in charge of competition policy Joaquin Almunia. "The proposed aid for video games is indeed focusing on a small number of distinctive, culturally British games which have increasing difficulties to find private financing." The news means the UK government can begin providing tax relief on games that pass the proposed culture test, which assesses the Britishness of a game and its development. It may sound bizarre but the test was a sticking point for the EU Commission which was satisfied that "only around 25 percent of UK-produced games would be eligible for aid." UK gaming trade body UKIE says the breaks come into effect starting April 1, confirming that as originally proposed, developers of qualifying games can claim 25 percent relief on 80 percent of expenditure. "This is a great boost for the UK games industry, and excellent news for jobs and growth," said UKIE's Ian Livingstone. "There is no doubting the cultural, social and economic importance of games, the fastest-growing entertainment industry in the world. The new production tax credit will help UK games development talent to create even more world class, culturally British content for global audiences to enjoy. This support will undoubtedly result in a greater contribution from the games industry to the UK's digital economy." [Image: Sony Computer Entertainment]
UKIE 'pretty confident' UK tax relief will go through despite EU doubts
UK gaming trade body UKIE is "pretty confident" the country's tax break proposal will be approved by the European Union and finally put into place, nullifying the doubts raised by the EU Commission over taxpayers contributing to the proposed relief. Last year, the UK government approved the much-needed breaks for the country's ailing games sector, set to provide 25 percent tax relief on 80 percent of the budget for qualifying UK-made games. Then in April of this year, the European Commission put the proposal on hold by announcing an in-depth investigation, raising doubts over whether the relief was needed, and the potential for positive discrimination towards the UK and a resultant "subsidy race" between EU states. Speaking to Joystiq, UKIE CEO Dr Jo Twist said her organization expects the proposal to be approved by the EU Commission despite those doubts, although there are apparent concerns over how long the process will take. "I think we're pretty confident it'll go through," Dr Twist told us."We know that the [UK] government is 100 percent committed - across all parties, as well, there's 100 percent commitment to get this through. UKIE also approached other creative industries - so film, animation, and TV - and they wrote a letter of support to say 'we want the games industry to have tax credits just like we do now.'" "We sort of weren't altogether surprised that [the European Commission] did this because the European Union is the European Union, and they have to go through these processes and ask the questions and make sure that they're asking the right questions," she added.
UK Interactive Entertainment CEO defends games as culture before EU tax investigation
Last week the European Commission announced it would kick off an "in-depth investigation" into proposed UK tax relief for video game developers, and UK Interactive Entertainment's Jo Twist wasn't too pleased by the news. This week the non-profit's CEO calls on the UK games industry to send a clear message to the European Commission, that games are culturally and economically relevant."[Games] generate culture, and are purveyors of culture in their own right," Twist writes. "They generate emotion and opinions, and the way they do that is through story, through experiences, and a huge diversity of innovative mechanics ... We have to show why there are not as many culturally British games being made as there could be and how the credit would help address this."The UK games tax relief plan calls on developers to pass a "cultural test" before receiving financial aid, incentivizing games starring British lead characters, in British locations or made by a local British team. The EU Commission worries the tax relief could negatively impact competition."The market for developing video games is dynamic and commercially promising," said EU Commission VP of Competition Policy Joaquin Almunia. "It is not clear whether the taxpayer should be subsidizing this activity. Such subsidies could even distort competition."Twist notes that the EU Commission investigated both the UK film tax credit and French video game tax system, both of which were eventually approved, setting a historical precedent to accept the UK's proposal. Further information on UKIE's defense can be found on its Facebook page.
EU Commission raises doubts over UK games tax relief, launching investigation
The European Commission announced an impending "in-depth investigation" into the UK tax relief for video games following doubts regarding its necessity. The breaks, announced last year by the UK government, are set to provide 25 percent tax relief on 80 percent of qualifying games' budget spent in the UK, a move long demanded by the country's ailing games industry. However, today's news raises serious doubts over whether or not they'll be implemented, with the EU Commission noting a number of concerns over the scheme.The European executive body not only doubts if the relief is needed to boost the country's games industry, but also noted the potential for positive discrimination towards "goods or services 'used and consumed' in the UK," as well as a "subsidy race" between EU states. The Commission also raised concerns over the proposed UK cultural test and whether or not that would produce "unique distortions of competition.""The market for developing video games is dynamic and commercially promising," said EU Commission VP of Competition Policy Joaquin Almunia. "It is not clear whether the taxpayer should be subsidizing this activity. Such subsidies could even distort competition."UK gaming trade body UKIE says it's "extremely disappointed" with the EU Commission's decision. In a response, UKIE noted such an investigation could delay the aid's implementation even if it was eventually approved."We believe this support is crucial in opening up the opportunity for developers to make culturally British games," said UKIE CEO Dr. Jo Twist, "But also as a vital incentive for development studios and large multinationals to base their development in the UK and nurture the talent here. We are still confident of having the scheme introduced and are fully committed to having it in place as soon as possible. A similar investigation into the French games tax relief system was successful but this took 12 months to conclude."While a recent report by UK trade association TIGA indicated some signs of recovery for the country's games industry, 2012 saw Wipeout team Studio Liverpool and 007 Legends dev Eurocom both close, as well as high street retailer GAME suffer financial meltdown.
UK video game tax relief hinges on passing this 'cultural test'
The UK government outlined a "cultural test" that video games developed in the region must meet for the studio to qualify for tax relief, as part of the industry overhaul begun earlier this year. A game must earn 16 points to receive the tax break, with points awarded for such criteria as being "set in the United Kingdom or another EEA state," which includes all countries of the European Union, plus Iceland, Liechtenstein and Norway. The studio gets four points if the game stars two of three lead characters "from the United Kingdom or another EEA state or from an undetermined location," or it depicts "a British story."If at least half of the game's development is completed in the UK, studios can earn three points, while a "qualifying" project leader, script writer, composer, artist, programmer, designer and department head earn one point each. If at least half of the entire team qualifies as a legitimate UK operation, the studio gets another point. The tax code is like a game in itself.For example, if a studio in the UK (3 points) with all local staff (8 points) creates a game about a time-traveling doctor in a bowtie (4 points) as he journeys around Liverpool (4 points), Hufflepuff wins the House Cup. See? Easy.Peruse the entire cultural test below.
Apple's plan for Reno data center gets green light
Apple's gotten the thumbs-up for another data center, this one in the biggest little city in the world, Reno, Nevada. Unfortunately, the deal itself doesn't hold a lot of weight, but at least Apple's gotten another nod in the right direction. The Nevada Board of Economic Development put its support behind the ongoing deal, agreeing to bring in the data center, and provide Apple with up to $89 million in tax breaks. Now, that board doesn't actually oversee deals like that, so a lack of endorsement by this board doesn't mean the deal would have been dead in the water. Local governments have already approved most of the tax breaks that Apple needed from Reno. But there were some concerns on this board, and there was talk of maybe trying to stop the deal somehow. So a vote to endorse the deal is just good news for Apple, and means that there won't be any issues from higher up the chain. Someone on the board did promise to bring the deal back up next year, but Apple's data center is set to go live sometime in 2012, so it may be a moot point by then. [via Engadget]
EU could lose tax breaks for game developers, threatens talent exodus
The European Union provides us a small-scale glimpse into the potential functions of a truly global society -- and more recently, a global society in crisis. The unified currency of the EU, the Euro, was on the brink of collapse recently and all of its member countries are still running damage control.Now, France in particular is facing another monetary hurdle, as its tax incentive for game development has expired and casued "genuine concern" the EU may not renew the exception that would reinstate it. State aid is normally forbidden under EU law, but in some cases it is allowed -- without an exception, game-development tax incentives would be banned in all EU countries, including France and the UK, Develop reports.French developer Quantic Dream (Heavy Rain) said that if the tax break is not reinstated it would relocate its operations to Canada, which does offer incentives for development companies, Develop adds. And according to TIGA, The UK's game-development workforce -- which sees no tax breaks -- fell 10 percent between 2008 and 2011, with 41 percent of its workers relocating overseas to countries such as Canada.
NYT: Video-game companies take lucrative advantage of US tax code, especially EA
If the United States tax code were cheese, it would be more Swiss than American -- tax breaks and incentives for software development, research and technological advancement were established to promote an intellectual advantage in the US, and video-game companies are in a unique position to take full advantage of federal funding, especially EA, The New York Times reports. EA boasts $1.2 billion in global profits over the past five years -- which is technically a net loss, after deferred revenue, executive-stock-option deductions and other accounting necessities, including a payout of $98 million, cash, in taxes worldwide. The US federal tax rate on any company is 35 percent, but that's before the creative accounting. In 2004, EA hired Glen Kohl, formerly an employee of the Treasury Department under President Clinton, to make the most of its tax incentivies. Kohl has since lobbied for federal tax breaks on domestic production and established offshore subsidiaries in low-tax countries. EA now has 50 offshore subsidiaries in countries such as Bermuda, Singapore and Mauritius, and holds $1.3 billion in offshore funds that won't be taxed unless brought into the US. EA spokesman Jeff Brown justified EA's monetary exportation as a consequence of running an international business:
Mass. bill proposes stepping up state's game dev incentives
With EA set to break ground for a new facility at LSU, and Gameloft considering similar "endeavors" in New Orleans, Louisiana legislatures have got to be feeling good about the allure of the state's Digital Interactive Media Credit. 1500 miles to the northeast, Massachusetts is considering enacting similar tax incentives for game developers through a bill filed earlier this year by Rep. Vincent Pedone. As the bill, affectionately known as "H03301," continues to kick around the Mass. Legislature, representatives of specialty tax services provider Alliantgroup take a look at its proposed "rewards" on Develop. While subject to alteration, the current draft of the bill proposes significant tax credits for both labor- and production-based costs incurred by large and small game-related companies alike, including a potential credit for a "promotional logo of the commonwealth of Massachusetts" placed on a game. In other words, stamp a game with a "Made in Massachusetts" logo (as Alliantgroup dubs it) and a company could earn up to a $75,000 annual credit under the bill's current stipulations. Of course, the bill has yet to be put to a vote by state lawmakers, who can ill afford to sleep on it for long if they want to keep pace in the "quest" to win over the game industry. In addition to Louisiana, Alliantgroup identifies 16 other "game-friendly" states, including neighboring Rhode Island, which last year lured away Curt Shilling's 38 Studios from Mass. ["Made in Massachusetts" logo source: Massachusetts Bay Trading Co, Inc.]
North Carolina to provide tax breaks for game companies
North Carolina is going to provide some epic tax breaks to video game developers. According to the ESA, a bill signed by Governor Beverly Perdue will provide a 15 percent tax credit on "wages and compensation for employees involved in digital media production, or the creation of a platform or engine to run such media." Of course, the big winner here is North Carolina-based Epic Games, which swims in a lake of Unreal Engine money and develops games in its spare time. However, other benefactors of the tax breaks include Electronic Arts, Ubisoft and another dozen or so developers in the state. The incentives take effect January 1, 2011. Publishers, developers and governments use tax breaks like Ezio wields the hidden blade. It's a weapon, either for financial defense (which seems to be the case in North Carolina) or aggression. With Canada's relentless siren call of tax incentives, if other countries and states don't step up their game, The Great White North will continue its Tim Hortons-fueled march to eventually developing most of the world's video games.
38 Studios meeting with Rhode Island reps regarding studio move
A week before 38 Studios is finally set to reveal its EA-published title, "Project Mercury," former baseball player Curt Schilling's Massachusetts-based studio is playing hardball for tax breaks. The Boston Globe reports studio heads are set to meet with Rhode Island reps on Thursday to discuss, in part, up to $75 million in loan guarantees in exchange for moving the company down south (about a 90-minute drive from its current location). Representatives from the Rhode Island Economic Development Corporation state that 38 Studios approached them about the potential move. According to the Globe, Schilling has said the studio plans to hire over 300 workers over the next couple years at 38 Studios and Maryland-based Big Huge Games, which the company acquired last year.
Rhode Island pitches a $75M loan offer to 38 Studios
States are always highly competitive when it comes to luring industries to their neck of the woods to bolster the local economy. From movie shoots to auto plants to hospitals, states tend to be shameless in offering incentives and tax breaks to benefit from an economic injection by these companies. It's interesting to see that MMO studios are being courted as well. Worlds in Motion is reporting that Rhode Island is enticing Curt Schillings' 38 Studios to relocate from Massachusetts in exchange for a $75,000,000 guaranteed loan under relief provisions for high-tech companies -- a provision that Massachusetts does not offer. The loan would represent a significant investment for the company, but Massachusetts is attempting to provide reasons for 38 Studios to stay put, including citing that it has better access to talent in the state. As the MMO genre expands and more studios pop up, will we see an increase in states fighting over these companies in an effort to help their economies? In any event, Copernicus' developer now has a difficult decision to make, especially for this ex-Boston Red Sox pitcher.
New UK government a possible setback for game dev tax breaks
[James Stringer] A report from Develop claims that the much-lobbied game development tax breaks that UK developers have been seeking may have to wait a bit longer before coming to fruition. Sources close to the UK government told the site that the recently reorganized government -- a new coalition of Liberals and Conservatives -- will "look to find its feet" before any further discussion takes place on the previously greenlit tax break initiative. "We're not really sure what the future holds. It's very early days and we have to hold discussions and set in train how this is going to work," the source told Develop. That said, newly appointed, game-friendly Culture Minister Ed Vaizey could help to get plans quickly back on track. Vaizey has spoken out in defense of games in the past, even belonging to a group set to publicly defend the medium earlier this year. For the time being, a Treasury Department source added that the previous party's tax break bill is still "in motion" and that the new administration would "have to act to stop the plan." We're hoping it'll still be too busy finding those feet to stop it.
Florida legislature passes bill for better digital tax breaks
Though the peninsular state of Florida plays host to a handful of video game companies, including EA Tiburon and Alienware, it's not really a hotbed of ludological movers and shakers. The state's governing bodies are looking to change that with a recently passed bill which will increase tax cuts on film, television and digital media (see: video game) production from 15 percent to 20 percent. Our favorite part about the bill, however, is that it awards an additional 5 percent break to film studios who produce movies during hurricane season. We wish this rule applied to game developers as well. "Okay, guys, we know we set a launch date of Spring 2011, but it's officially crunch time, because our studio doesn't have a roof anymore."
Molyneux calls on UK government to support games industry
Speaking to the Telegraph at Microsoft's X10 event, Lionhead's Peter Molyneux has called on the UK government to give tax breaks to local game studios. Said Molyneux, "It is just crazy that the British government does not recognize the games industry as a creative industry in the way it recognizes others," noting that Canada recently replaced the UK as the third largest games industry in the world. He noted that many measures taken by Canada have been proven to be "financially sensible." Molyneux's words contribute to escalating pleas for government support in the UK. Over the past year, the issue has been consistently pursued by the industry, with developers calling for tax breaks, and the government in turn asking for evidence of how such breaks would culturally enrich the country. Meanwhile, an August report noted that the production of original IP was declining and suggested that developers might be willing to take risks on original ideas with tax cuts in place. Molyneux probably sums up the situation best: "The UK has a great heritage of invention and creativity, it's just the rest of the world have a great heritage of recognizing that properly and it frustrates the hell out of me."
Ubisoft UK MD talks 2010, warns against rising prices
Writing for MCV, Ubisoft managing director Rob Cooper has laid out his company's hopes for the UK game industry in the next decade. He writes a great deal on ELSPA's role in championing the industry to the UK government, specifically regarding things like tax breaks and game rating issues. Regarding an issue closer to gamers' hearts, Cooper discussed where games are headed in the years to come. "Where once fuzzy pixels danced around on the screen," says Cooper, "now we expect everything from the visuals and sound effects to the dialogue of our characters – along with the emotions they can portray – to be more finely tuned." He cautions the industry however, noting that such finely tuned products require higher studio costs. He elaborates that there is "no point" in raising game budgets if they cause profits to dwindle or, more importantly for consumers, cause prices to become "horrifically high." We're inclined to agree. It's an interesting piece, and definitely worth a read for anyone who enjoys a little inside baseball.
Eidos Life President Livingstone speaks out against mainstream media's game coverage
During the Westminster eForum this week, Eidos head (and Life President) Ian Livingstone had some less than favorable things to say about the mainstream media's coverage of the gaming industry. "People just couldn't accept that games are a great learning tool," Livingstone told the crowd of "industry representatives and their advisors, interest groups, local authorities, the voluntary sector and academia, along with members of the reporting press," reports MCV. He asked for mainstream news outlets to focus less on violence in games and to instead look at "the poor skills the UK has to make games." In his eyes, the mainstream media's overwhelming focus on violence in games -- and consistent ignoring of the economically beneficial side of the game industry -- certainly isn't helping to bring the development tax breaks he's been pushing in the UK for quite some time now. To help change minds, we suggest that Mr. Livingstone get in touch with the two people who have been most able to clearly convey our feelings on the violent video game debate -- Penn and Teller, of course!
Talent, not just tax breaks, drawing devs to Canada
Tax breaks are a great way to get developers interested in Canada, according to minister of economic development and trade for Ontario Sandra Pupatello, but they may not be the best way to keep them there. Pupatello worries that while trying to entice devs, competing provinces could drive tax breaks to an untenable position. She says that nuturing a talent pool should be the bigger focus, an approach that has worked in Ontario. "We knew that Ubisoft establishing a significant footprint in Ontario would in itself would help tell the story of what's available," Pupatello told Develop. "Why would Ubisoft come unless they knew that they were going to get absolutely the best talent?" Uh, free health care and the staggering availability of Tim Hortons?
