Rockstar Economics

From the Times

The developer of the computer game Grand Theft Auto V — criticised for a graphic torture scene and sexual violence against women — is paying no UK corporation tax but claiming millions of pounds in public subsidy for the game’s contribution to British cultural life.

You could probably say the same about what the Welsh National Opera puts on. There's a torture scene in Tosca, and attempted rape in Don Giovanni. They also receive a whopping subsidy and I doubt they pay any corporation tax (as a charity). And somehow count towards British cultural life, when putting on operas in Italian set in European countries.

The "cultural life" thing is, if I recall, in the legislation, but actually a ruse. The simple reason we subsidise film, TV and video game production is that it isn't particularly location dependant. Game of Thrones, A Knight's Tale and Braveheart shot their olde worlde scenes of Westeros, England and Scotland in Northern Ireland, Czech Republic and Ireland respectfully. When it comes down to films shot on a soundstage, location matters even less.

OK, there's some restrictions. You can't go shooting Braveheart in Nepal or Saudi Arabia. Soundstages tend to be not too far from rail and air links. But there's lots of places that tick those boxes.

So, it's entirely reasonable for the UK government to offer some tax breaks for video games. If they don't, Rockstar will just have more developer jobs in Toronto. Do you want the jobs, the income tax, the extra money going into the economy, or do you want nothing?

It's called a subsidy, but it's really a correction to the problems of tax not taking account of mobility. We've had this for a long time, right back to Mrs Thatcher offering companies sweeteners to move their TV factories to Wales. So we have these blunt subsidies to correct the problem, when really, I think LVT would do it automatically: somewhere gets poor, land values fall, incentives appear to drive business towards them.