Scotland ponders tax breaks for gaming industry

Scotland wants similar tax breaks to those offered by Ireland in a bid to attract further interest to the gaming industry.

In a debate over whether the government should allow corporate tax, Stewart Hosie, an MP for Dundee East’s Scottish National Party, told delegates that corporation tax could be a key element in the country’s overall economic strategy. He added that it had the potential to promote economic growth by “enhancing international competitiveness and encouraging innovation and investment.”

One example he gave was in the games industry, which he said had “received a very attractive proposition from Dublin” as well as receiving tax breaks in Montreal. If Scotland doesn’t wise up, it could stump improvements, productivity and the competitiveness of the Scottish economy as a whole.

However, Ireland doesn’t credit its success with attracting the gaming industry with tax breaks or corporate tax. Instead it says the 50 billion euro industry is more down to its strong track record of investment in helping companies grow, while foreign companies settling in claim it’s the talent pool that attracted them.

Maeve McConnon, a business development manager at IDA Ireland, told TechEye: “In general, the gaming market in Ireland is very lucrative and Ireland has a very strong track record of investment to helping companies grow and support companies and services which choose to move over here.

“We’ve also got strong ties with the animation sector meaning that the pairing of games and this makes it an attractive market. There’s no one reason why companies move to Ireland, but the talent pool is huge here.”

McConnon added that there are other perks, such as 25 percent R&D tax credits.

But Scotland’s growing gaming industry is safe, according to Ms McConnon: “The benefit of Ireland is that we’re focusing more on digital gaming and mobile gaming, it’s a new avenue.

“However, the overall gaming market is growing quickly. There’s room for everyone is all I can say.”

The enormous PopCap, an American gaming company, moved to Ireland. It too had positive words.

Paul Breslin general manager, EMEA, told TechEye: “We moved to Ireland as we needed a European office. Ireland was the most attractive because of its talent pool and the huge range of software and computer linguistics available.

“This  linguistics pool has been built up thanks to a range of bigger companies such as Google and Yahoo moving into the country and making their mark here.

“We work with the Irish government and make use of the offered 25 percent R&D tax credits, which allow us to get a refund of any work in this part of the business.

“There is also the corporation tax, which is quite attractive. However, the main reason we’re in Ireland is because of the talent pool.”

High corporation tax and the lack of attractive tax breaks for the gaming industry in the UK have been under attack for a while now. The argument for is that the UK video games industry can play a part in rebalancing the UK economy away from an over-dependence upon financial services and the public sector.

Tiga, the UK gaming association, said back in February that the UK game development sector provided high skilled employment as well as being R&D intensive.

And earlier this year the Conservatives moved to appease the gaming industry by giving it the much sought after tax relief. The industry was incorporated in the budget, which gave it around £7 million.

The decision followed an announcement back in February when the Coalition hinted it was considering tax breaks for the gaming industry. It originally knocked the idea when it was introduced by Labour MP Alistair Darling in the Labour government’s last budget in March 2010.

In 2009, the video games industry generated £2 billion in sales, added approximately £1 billion to the UK’s GDP, raised over £400 million for HM Treasury in tax revenues, and employed more than 28,000 people.