Why Your Next Video Game Will Be Set In The UK

September 11, 2011 4:14 pm

If there is some business behavior that you find extremely difficult to explain from a normal profit&loss sense, then the reason for such behavior, in most cases, would be taxes. For example, if someone makes a statement saying building video games is extremely lucrative, and you are not convinced just by looking at the economics of the industry, then the reason for that statement is very simple: taxes. Turns out, video game production benefits from various tax benefits.

For the US, this is what we spotted:

“Those tax incentives — a collection of deductions, write-offs and credits mostly devised for other industries in other eras — now make video game production one of the most highly subsidized businesses in the United States, says Calvin H. Johnson, who has worked at the Treasury Department and is now a tax professor at the University of Texas at Austin.

Because video game makers straddle the lines between software development, the entertainment industry and online retailing, they can combine tax breaks in ways that companies like Netflix and Adobe cannot. Video game developers receive such a rich assortment of incentives that even oil companies have questioned why the government should subsidize such a mature and profitable industry whose main contribution is to create amusing and sometimes antisocial entertainment.” Source: NYTimes

And for UK, we spotted this:

“Chancellor George Osborne said he planned to introduce corporation tax relief from April 2013 for the video games, animation and high-end television industries.
The industry has lobbied for such changes for several years.

The chancellor said he wanted to make the UK the technology centre of Europe.”
This could be something that will soon get fixed – but you can be a healthy business by then.” Source

And here is how the complicated tax credit system works – “In addition to receiving up to 16 points for producing and creating the game within the UK, you can also get 1-4 points depending on how much of the game is set in the UK and another 1-4 points depending on how many British characters you have; you can also get points for using certain languages and contributing to the “enhancement of British culture.” If you get to 16 points, you win! That is, you get a big tax break.” (Source)

This would have a telling impact on the content of the video games. The real impact on British culture is debatable – but in the short run, video game makers are heavily incentivized to work on gaming themes related to the UK in general.

So there it is – the incentive for video game makers to enhance ‘British culture’ – language, location, characters – See you in London!

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