U.K. Launches Investigation Into Canadian Videogame Trade Practices

[Andy Chalk]

U.K. Launches Investigation Into Canadian Videogame Trade Practices

The United Kingdom has officially entered into a trade spat with Canada over the country's generous tax credit systems for videogame developers.

Numerous provinces in Canada offer tax rebates to developers who set up shop in the country. A Vancouver Sun [http://www.canada.com/vancouversun/news/business/story.html?id=7a0baad7-377c-41c8-9d0c-bde81ea26c4d]report says Manitoba, Quebec and Ontario lead the way, allowing companies to write off 30-45 percent of labor cost, while Nova Scotia and Prince Edward Island also offer labor tax credits. In British Columbia, private investors in new media ventures receive a 30 percent refundable tax credit, up to $60,000, while corporations receive the same amount in a non-refundable credit.

"The Canadians have driven a tank over the French Citroen and have now parked on our lawn," said Paul Jackson, director general of the Entertainment and Leisure Software Publishers Association [http://www.elspa.com/], a U.K. videogame trade association. "It is becoming very challenging to keep core development studios here."

Acting on a threat [http://www.escapistmagazine.com/news/view/78440]issued in October 2007, the U.K.'s Ministry of Culture, Media and Sport has requested an investigation of Canada's trade practices through the European Commission. "The U.K. government is concerned that state aid offered to computer games companies by a number of federal institutions in Canada may not be compatible with World Trade Organization principles," the ministry said in a statement to CanWest News.

Investissement Quebec CEO announced [http://www.escapistmagazine.com/news/view/79403]earlier this week that it would be increasing its tax credits for videogame developers, as well as adding additional financing to the province's Interactive Digital Media Fund.


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[Melaisis]

Go, go Commonwealth braaawl!

Despite being a British citizen; I agree with the decisions of these studios to migrate over to the other side of the Atlantic. Our government has hardly been fair on developers of late (the 'Manhunt 2' thing is only a very small demonstration of their untimely ruthlessness) and if studios can get better rates overseas, then the only way the British government can think to respond is to sue Canada? Jealous, much?

This will not go anywhere.

 

[thebobmaster_v1legacy]

They are taking what I call "the South Park approach" and blaming Canada for their faults.

 

[Easykill]

Being Canadian, I'm perfectly happy with the game developers all moving here. It'll be like Hollywood, but for games!

 

[MrHappy255]

We are already a haven for tech, Kanada in Ottawa is Canada's version of silicon valley and it won't stop their. Ever since Canada has lost most of their industrial complex jobs they have been increasing funding and tax credits to the tech sector. Cry me a river Britain, every country gives tax credits we are just doing in the sector with the big bucks. It's finally time that Canada stood up to someone and said F off. Yay team.

 

[Jakkar]

"Hey look, chaps! Those blasted 'nadians are stealing our game developers with their savvy, forward-thinking support of a fast-growing industry! Let's throw things at them until they bleed!"

"Wise thinking! Passepartout, fetch my rocks!"

If I were patriotic I'd be ashamed. As I'm Welsh and in denial of the fact, I'll just laugh and steal their rocks.

 

[richasr]

Sometimes I really can't stand this damn country, so many flaws and hypocrisies I'd like to move myself to another country.

 

[Meshakhad_v1legacy]

Go Canada!

 

[The_root_of_all_evil]

Canada : Home of Celine Dion.

UK points and laughs.

 

[Anton P. Nym]

UK: Home of the Spice Girls

Canada points and laughs back.

-- Steve

 

[The_root_of_all_evil]

Damn. Foiled again.

 

[WingedFortress]

I'm holding back from doing some patriotic schpeel. Because that shit sucks.

 

[Omnidum]

Thank god im not in the crossfire, unless both start to pick on Denmark.

 

[edinflames]

as a British person i feel qualified to say:

As a nation, we epically phail when it comes to forward thinking industry. Post war history of Britain is typified by this approach to problems/challenges. The fact that our largest money-spinners (besides the tourists who come to see our ill-educated, ill-informed, incumbent monarch and her horrible brood) are the Financial sector and the Arms trade (both industries being at least 300 years old) demonstrates the above point even further.

Go Canada, this will be good for the games industry as a whole. It just saddens me that is has to be another country that leads the way, when Britain has the luxury of its current relative wealth and COULD invest in a similar programme.

 

[Combat Marmot]

I don't mean for this to come across as judgemental, but why are tax credits given anyway? Is it because the industry actually makes a lot towards the economy once it gets going or is it because there are loads of people graduating with degrees in e.g. computer games design and not enough jobs to go around?

 

[Anton P. Nym]

I don't mean for this to come across as judgemental, but why are tax credits given anyway? Is it because the industry actually makes a lot towards the economy once it gets going or is it because there are loads of people graduating with degrees in e.g. computer games design and not enough jobs to go around?

It's the former. Actually, if anything there's a bit of a boom going on in the game industry and companies are hiring like mad... there's a (perceived, anyway) shortage of talent. Tax credits on employment costs not only draw companies to the region offering the credit but also take the pinch out of offering competitive wages, potentially a double-positive for companies looking to expand.

Of course, the additional wages in the region mean more income tax flow, which takes the edge off the credits on the government side. Plus if there's new physical plant going up you get construction (and sales taxes on those materials), and there's land purchase (with transfer taxes, and future property taxes) and spill-over jobs too.

I don't know how it washes out, in terms of dollars-in vs. dollars-out for government, but it's certainly not a "make work" program for surplus Comp.Sci grads.

-- Steve

 

[Possum-Man]

It appears the UK has once again put it's foot in it. As an amateur game-developer I'm pretty ashamed of our governments attitude towards games and game-development. Personally, I'd love to set up a game development company here in the UK but there isn't anything that makes me say "Yeh, it's a great idea to set up in the UK." The current policies make me say things like "Hmmm, perhaps Canada would be a better place to go, hell, even Europe would be better that the UK."

I don't think the government has quite tagged that "Game Development = Profit for developer and country." Sometimes I wonder why we elect these people who make our economy miss out on something so profitable.

P.M.

 

[cappp]

It's important to recognize that the dispute isn't over forward thinking, or the perceived value of the games industry itself, but rather over legal obligations of World Trade Organization (WTO) signatories (of which both Canada and the United Kingdom are). A tax credit scheme of this kind may be a violation of WTO subsidy limitations i.e. Canada may be in violation of international trade laws by offering tax credits to the detriment of other WTO members. As the credits allow for a significant saving in the cost of labour, and Canada enjoys development of its internal creative industries as a direct consequence of said credits, other WTO members have a reasonable and viable claim of illegal market manipulation. The UK is merely protecting its legal rights, and domestic markets, in challenging potentially illegal actions - not arbitrarily attacking Canada or the games industry. Canada is bound by WTO rules as are other members and must be held accountable for any and all violations they are deemed to have made.
Similarly, if the European Commission rules that Canada has unfairly provided subsidies to the industry, it may permit the imposition of punitive import duties on certain products. Again, this is done only as a means of protecting the domestic markets from illegal, and unfair, subsidization.

Those interested in the WTO issue might consider reading Article 1 of the Uruguay Round Agreement, the Agreement on Subsidies and Countervailing Measures, which can be found at:
http://www.wto.org/english/docs_e/legal_e/24-scm_01_e.htm .
The EU procedure can be reviewed at:
http://ec.europa.eu/trade/issues/respectrules/tbr/legis/adgreg06a.htm

 

[jezcentral]

Our Prime Minister Gordon Brown hates tax loopholes (a hangover from when he was Chancellor of the Exchequer, which is a Treasury Minister for you foreign types). He tries to close them, but in doing so risks alienating the businesses that use those loopholes. The film industry used to use Britain a lot, but they've now gone to New Zealand, Eastern Europe and elsewhere, since the Labour government closed to the film financing tax incentives. That said, it is possible that Canada is in the wrong here (at least as far as the EU is concerned). With all the legalese flying around, I'll have to wait to see how it plays out, to find out.