Games designers urge tax reforms to avoid 'brain-drain'

Games designers urged the Scottish parliament yesterday to help push through tax breaks for the videogame industry amid fears Ireland could be set to lure British talent overseas.

The Irish government has been asked to consider tax breaks for videogame developers but the move will have a “severe impact” on the UK, according to a prominent trade association.

Dr Richard Wilson, CEO of the trade body TIGA, has called a meeting at the Scottish Parliament which is being attended by Scottish developers as well as politicians, including Joe Fitzpatrick, MSP for Dundee West.

The discussion, called Scotland In Focus, is looking at the strength of the Scottish videogames industry and the challenges it faces. Ireland is considering a five-year tax holiday.

According to Dr Wilson, the combined turnover of the Scottish games industry is £20 million and it employs 700 workers with Dundee being at the centre of the country's creative talent.

“There are 40 developers based in Scotland and there are some incredibly important success stories such as Grand Theft Auto IV,” Dr Wilson says. “With the Irish looking at tax breaks, it is vitally important we push ahead with the idea of incentives here in the UK and we will be stressing not only the financial benefits of the gaming industry to Scotland but also its educational importance.

“The Scottish Parliament is not able to introduce tax breaks of its own but what it can do is reinforce the argument that the UK as a whole needs to react otherwise there will be a severe impact - it's likely that, should Ireland go ahead, there would be a major brain drain abroad.

“Some UK-based companies are already setting up in Dublin – in particular insurance and pharmaceutical firms – and we don't want to see the same happen with gaming. In Scotland, 36 per cent of the games industry's revenue is generated from exports so you can the impact the country is having and how important it is to protect that.”

Britain is currently the fourth biggest games producer in the world having slipped behind Canada due to tax breaks which can amount to up to 37 per cent of a game's production costs.

The average games company in Scotland employs 34 people and makes around three to four games each year. But there are some huge firms, including the award-winning Realtime Worlds which is the largest independent developer in Scotland with more than 200 employees.

Colin MacDonald, the company's studio manager, says: “We've come a long way over the past few years as an industry. There was a time when politicians wouldn't answer our calls but now we are seen as important and barely a week goes by when we are not showing somebody around and telling them what we do. We are one of the growth industries and it's important we are given support.”

In August, Sion Simon, MP and Minster for Creative Industries, was presented with evidence which claimed tax relief for the development of videogames would create 1,400 new UK jobs and be the catalyst for multi-million investment by British studios.

TIGA estimates that a Games Relief Tax would cost £54 million in the first year and would fall to between £32 million and £36 million in subsequent years. The idea is that it would run on similar lines to a tax incentive scheme offered to the film industry and that games would have to pass a cultural test before being awarded any financial leeway.

It claims it would lead to an increase of direct and indirect annual tax revenues by £133m and GDP contribution rises of £323m.

Colin Anderson, MD of Dundee-based developers DENKI, said: “We do need to act now. Although we wouldn't move to Ireland because our talent is based here in Scotland and we would have to uproot everybody, there will be companies which will have few problems in doing so. But it's not just about Ireland – it's to do with securing the future of UK games development in itself and encouraging innovation.”

Today's discussion in Scotland is being held in conjunction with the National Endowment for Science, Technology and the Arts (NESTA), an organisation dedicated to innovation. Its Time to Play report looked at the impact of a tax credit for cultural videogames and found developers would be more willing to be creative.

Jackie McKenzie, NESTA's head of innovation in Scotland, said: “Developers are in a situation where they need funding and IP rights in order to release new, innovative content but publishers won't take that risk which is why the top 20 games are often licences and sequels. The games industry is highly skilled and it is able to be creative and with tax breaks in the UK we can unleash that creative talent while encouraging greater investment in this country.”