Over at AEI, Mark Perry put together a chart that got a lot of attention yesterday. The chart shows that for the first time ever, Americans are spending more money at restaurants and bars than they spend at grocery...
- The Tax Policy Blog
- Video Game Tax Breaks in the UK
Video Game Tax Breaks in the UK
The Tax Foundation is critical of film tax credits for a variety of reasons - they're wasteful, ineffective, undermine tax neutrality, and so forth. In addition to the economic arguments, there are also free speech concerns - some states require films to portray them in a positive light to be eligible for the credit, for example. They use the tax code to regulate content.
Other forms of media and entertainment besides film get similar treatment, and video games are no exception. The latest example of this trend is the UK government's proposal of a particularly byzantine "cultural test" to ensure that British video games are sufficiently British. It's based on a complicated "points" system where different amounts of points are awarded for doing things that the British government approves of. 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.
One wonders how to apply some of these requirements to a medium that is, by its nature, variable and interactive. For example, one point is awarded if the game is "at least 25% set in the UK." How do you measure that percentage? Mass Effect 3 is set mostly in outer space, but humanity makes its last stand against the evil Repears in London. What if I have lots of trouble with the end, and spend a quarter of my time playing the game on the final battle? Should video game companies monitor their players and collect these statistics in order to be eligible for the tax break? What if I'm starting a new Civilization 5 game and trying to decide who to play as? If I play as England, maybe my copy of the game ought to be eligible for a tax break, and I should apply to Firaxis for a partial refund. Unless, of course, I screw up and get conquered by France - then I should probably send the money back, because I'm certainly not portraying British culture very well.
Rather than trying to use the tax code to micromanage content, governments should pursue a neutral tax policy that allows creativity to thrive. Game designers shouldn't have to make decisions about what to put in their games for tax reasons.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.