Gauke on tax relief: "We do not accept validity of TIGA's analysis"
Treasury secretary finally explains government position - "a question of economic efficiency"
Exchequer secretary to the Treasury David Gauke has finally clarified the government's refusal to bring about planned tax relief for the UK games industry.
Previously, official explanations have not gone far beyond calling the plans "poorly-targeted," leaving many in the industry unsure as to quite why the Treasury had decided against them.
In a parliamentary debate concerning a revision of games tax credit proposals earlier this month, Gauke stated that "We have heard the figures quoted by TIGA, but we do not accept the validity of that analysis because we feel that some of the assumptions underpinning those estimates are erroneous."
Industry association TIGA claimed in its proposal that games tax relief could create or protect 3550 graduate jobs and almost £500m of development expenditure.
Claimed Gauke, one of Chancellor George Osborne's right-hand men, "The research commissioned by the industry implicitly assumes that the investment incentivised by the subsidy is entirely additional to the UK economy.
"In reality, it is likely that the relief will displace investment from elsewhere in the economy, so the net impact on total UK investment could be limited.
"For example, it is possible that such a tax subsidy would divert investment from more productive sectors to the detriment of the productivity of the UK economy as a whole."
When pressed further on his argument, Gauke added that "[TIGA's analysis] does not appear to recognise that... highly skilled graduates would not remain unemployed if they did not find work in the video games industry."
Gauke claimed that, rather than deciding against helping the games industry in particular, the government was interested in supporting all UK businesses.
"I do believe... that the strongest economic case can be made for lower tax rates as a whole, across a broader base, as opposed to targeting some sectors, unless there is a strong case that there is some kind of market failure.
"We have not yet heard such a case being expressed in a way that we find persuasive, and that is why we decided not to proceed with video games tax relief.
The loss of 900 UK development staff over the last two years was not mentioned, nor was the closure of studios such as Real Time Worlds, while the discussion pre-dated Activision's apparent plans to dispense with Bizarre Creations.
Closing his argument, Gauke requested that the new proposal be withdrawn, stating that "We do not think that such an intervention would represent good value for money for the Exchequer or be conducive to providing a simple and competitive tax system.
However, the secretary claimed that the decision had nothing to do with a negative preconception about the industry amongst government ministers.
"There is no sense in which the Government are in any way anti-video games or think it is an antisocial issue or anything like that.
"It is question of economic efficiency."
Despite Gauke's comments, David Cameron yesterday reaffirmed the government's commitment to sector-specific tax relief for the film industry.
Commented TIGA boss Richard Wilson on Cameron's pledge, made during Prime Minister's Questions, "Whilst we are pleased that our friends in the film industry will continue to receive sector specific support, we find it extraordinary that the Government continues to oppose introducing games tax relief.
"Richard Harrington MP made clear in his question that a key contributing factor to Warner Brothers' decision to continue to invest in the UK, and create 600 more jobs in Watford, was the film tax credit.
"If the shoe fits for the film industry why does the Government continue to argue it does not for the video games industry?"
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