UK Tax Needs To Be More Competitive, Says TIGA

by Robert Lee, Tax-News.com, London

22 July 2011

TIGA, the UK games industry association, has once again criticised the UK's tax system, arguing that a better tax environment is needed, one which encourages investment, business growth and inward investment.

Commenting on recent reports which, according to TIGA, demonstrate that the UK tax regime is uncompetitive and that development staff are being drawn away to Canada, the association has argued that businesses involved in the games industry are choosing to forego investment in the UK.

TIGA cites a report by HM Revenue and Customs (HMRC), which allegedly acknowledges that one in four large businesses are considering leaving Britain to escape its growing tax burden. According to TIGA, cuts in corporation tax do not appear to have provided the UK with a competitive tax regime.

The government intends to establish "the most competitive tax system in the G20", and is in the process of reducing the headline and small business rates of corporation tax. The small business rate fell to 20% in April, and, after an initial 2% reduction to 26% this year, the headline rate is to decrease on a yearly basis until it reaches 23% in 2014.

However, this apparently has not had the desired positive impact on the video games industry. TIGA says that investment is being diverted to jurisdictions with tax breaks for games production. The association quotes Andrew Wilson, senior vice president of worldwide development at EA Sports, as having admitted that Canada is seen as a better investment destination than the UK. TIGA cites Wilson as having said that “EA has many studios that takes advantage of game tax breaks and EA Canada is certainly one of them".

Dr Richard Wilson, CEO of TIGA, said: “The UK needs a tax environment which encourages investment, business growth and inward investment. Unfortunately, HMRC’s own research demonstrates that 26% of large businesses are considering leaving the UK because of the tax burden. In the case of the video games industry, businesses are already foregoing investment in the UK and investing instead in jurisdictions with tax breaks for games production. The provision of tax breaks in Canada is also helping to fuel a brain drain of key development staff from the UK. The Entertainment Software Association of Canada acknowledged earlier this year that Canada has been successful in attracting investment and skilled personnel from the UK. These new comments by Andrew Wilson of EA Sports confirm this phenomenon.”

Jason Kingsley, TIGA Chairman and CEO and Creative Director at Rebellion, added: “The government rightly says that it wants to create the most competitive tax system in the G20. There is clearly much more that needs to be [done] in order to achieve this objective. TIGA will continue to revise and strengthen its case for Games Tax Relief, enhanced R&D Tax Credits and a supportive tax environment generally in order to improve the UK’s tax regime.”

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