In his emergency budget a few weeks back, the British Chancellor, George Osborne decided to abandon the computer games tax relief which had been promised by his Labour predecessor last March.
The plan had been to extend the 20% tax break enjoyed by the film industry to the video games development sector, and had the support of the LibDems and the Conservative party at the time. Not anymore.
The news was understandably greeted with horror by the British entertainment software industry. It was not expecting it and warned of an exodus of creative talent, particularly to Canada.
The video and computer games sector is literally a billion pound industry in the UK alone. You only need to take a look around any shopping area to see how many games stores there are, not to mention the huge online games business.
It employs about 30,000 people, mainly graduates, in the UK and contributes over £400m to HM Treasury in taxes every year. The amazing decision by a Tory Chancellor to scrap the promised tax reliefs on the development of gaming software is in stark contrast to the trend elsewhere.
Computer games companies in Canada can get tax relief of 30-40% on costs, including wages, while France recently introduced a 20% tax relief scheme for the industry. The Canadians are looking to see how they can attract even more of the industry away from the UK following the British Government’s decision.
So should we. And we should start now.
Moving to Ireland would be a more attractive proposition for many of the developers currently based in UK. Not only are we closer and share a common language and similar legal system, we also offer access to the lucrative EU market.
And this is a market that is set to grow again after a few poor years. A report by PricewaterhouseCoopers predicts that revenues from the entertainment and media market will grow by 20% over the next few years.
Ireland, with its track record in IT and skilled graduate base is an ideal location for this sector. Indeed I would go further and suggest that Limerick and the Mid-West region is the right location for an expanded entertainment software industry – much in the same way that Dundee in Scotland has become a base for video games development. We have the people, the skills and the infrastructure.
We should look at using the next Budget to offer tax reliefs that approach those offered by Canada. Not only is this a sector that offers good employment to our graduates, it is a huge export industry. The contribution it would make to our balance of trade and tax receipts would pay for the cost of the relief in no time
While attracting the sector to Ireland is a big idea in itself, there is an even bigger idea in this development too. This time it was the scrapping of plans to introduce a new tax relief, but it looks as it the Con-Dem government plans to go further in its next Budget and target other reliefs.
We need to start thinking about other areas where the UK government might be making similar cuts – and start targeting those. There is already media and industry speculation in the UK that their film industry tax relief might be next under the spotlight – with others to follow.
We in Ireland are already well along the road of correcting out structural deficit, while the UK is now only embarking on that path. Their loss could be converted into our gain.