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Chancellor keeps quiet on videogames tax breaks

Update: No mention of possible relief for UK industry in Pre-Budget Report, as expected; TIGA and ELSPA disappointed

The Chancellor of the Exchequer, Alistair Darling, has kept quiet on possible tax breaks for the videogames industry in his Pre-Budget Report (PBR), released today.

In his 45-minute speech he did make passing reference to a "remarkable record of ideas and innovation" in the UK, and that "to promote growth, we need to invest in the dynamic sectors of the future - in digital, bio and low-carbon technology" - but made no mention of the games industry itself.

The omission was widely expected at a time when the UK's financial situation is grim - borrowing for this year is expected to be GBP 3 billion more than originally anticipated at GBP 187 billion - and the PBR green paper had hinted at a reticence to offer new handouts.

As part of the Creative Industries section it had noted: "The creative industries, including the videogames industry, make a valuable economic and cultural contribution to the UK. The Government committed in Digital Britain to work with the video games industry to collect and review the evidence for the introduction of a tax incentive to promote the development of culturally British videogames.

"While recognising the challenges currently faced by the sector in competing internationally, the Government is not currently persuaded that the evidence is sufficiently compelling to justify the introduction of a tax incentive for the development of culturally British videogames at this time."

The news - or lack thereof - disappointed trade body TIGA, whose CEO Richard Wilson responded by reiterating the potential financial benefits that tax measures would provide.

"The UK economy is in serious shape: we are still technically in recession, unemployment stands at 7.8 per cent, and Government borrowing has soared to GBP 180 billion," he said. "While the public finances need to be brought under control primarily through spending cuts, the UK economy desperately needs to go for growth. This means creating a tax environment that supports and sustains wealth creating and IP generating businesses. In the games industry's case, this means enacting a Games Tax Relief.

"We have consistently warned the Government that without the introduction of a Games Tax Relief the video games development sector will likely decline by 5 per cent each year over each of the next five years. Conversely, if a Games Tax Relief is introduced, then the industry will eventually enjoy annual growth of 4 per cent.

"In addition, Games Tax Relief will more than pay for itself. Over five years the tax measure would cost GBP 192 million but would deliver GBP 415 million in tax receipts. Games Tax Relief would also secure 3550 highly skilled graduate level jobs."

He went on to underline once again the uneven support shown between films and games, and pointed out the support given to other industries such as oil, manufacturing and banking.

"TIGA is convinced that the games industry has the potential to be one of the UK's leading digital industries as we emerge from the recession," he concluded. "We will redouble our efforts to convince HM Treasury and other policymakers of the need to invest in our sector in the form of Games Tax Relief, more generous R&D tax credits and other fiscal measures."

Meanwhile, publisher trade body ELSPA also expressed disappointment, but underlined the importance of continuing to work with the government along other avenues.

"It is disappointing that the Chancellor has rejected the case for tax breaks for 'culturally British' games," said ELSPA director general Michael Rawlinson. "Nevertheless we believe that the Government overall recognises the importance of our sector in creating wealth and securing jobs.

"We must now move on. We must build on the strong support Government has shown us elsewhere and, as the general election approaches, continue to develop and seek the adoption of our policies by all three major parties."

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