GTA, Red Dead Redemption Publisher Rockstar Accused Of Tax Avoidance

Grand Theft Auto and Red Dead Redemption publisher Rockstar Games has been accused of tax avoidance in a new report. Investigative thinktank Tax Watch UK states in its report that Rockstar’s combined companies paid zero corporation tax in the United Kingdom between 2009 and 2018, despite lifetime sales of Grand Theft Auto V totaling an estimated US $6 billion.

Further, Tax Watch claims Rockstar North, the Edinburgh, Scotland-based studio that led development of GTA V, claimed £70m of tax credits from Her Majesty’s Revenue & Customs over a 10-year period. Rockstar, which is owned by US company Take-Two, apparently achieved this by listing its profits outside the UK, instead declaring a net loss in the UK for the decade ending 2018.

The thinktank said: “This report also raises questions as to whether an appropriate amount of profit has been allocated to the UK companies involved in the game’s development. Seven active companies based in the UK using the Take-Two and Rockstar names declared a total profit before tax of £47.3m in the UK between 2013 and 2018. However, over the same period we estimated the operating profit of games published by Rockstar to be in the region of $5 billion.”

It continued: “It is our opinion that a more appropriate allocation of profit between the US and UK would have resulted in substantially more profit being allocated to the UK. This would have meant that Rockstar North would not be eligible for a payable tax credit. Instead, Take-Two and the Rockstar companies should have had a substantial tax liability in the UK.”

Grand Theft Auto V had sold nearly 110m copies as of May 2019 and is widely believed to be the most commercially successful entertainment product ever.

The UK government’s video game tax relief scheme allows developers to reduce their tax bill if they meet certain criteria, such as being developed in the UK or involving British characters, locations, themes, or issues. The body in charge of judging games on these criteria is the British Film Institute, which deemed GTA V as being sufficiently “culturally British” to qualify for the relief.

Tax Watch argues the only justification for GTA V being “culturally British” is its development being led from Edinburgh, but that this means the company should have paid more tax than it has.

The thinktank continued: “The situation is absurd. The large amounts of subsidy that Rockstar North has been able to claim from the UK government demonstrates that the video games tax credit system is not working as intended. The government should hold an immediate review into its effectiveness.”

It concluded: “We do not believe that this division of profits can be justified under the so-called ‘arm’s length’ standard found in international tax law. There is no evidence that HMRC has challenged this set-up or that Take-Two … has acted illegally. However, it is open for HMRC to challenge the allocation of profit under the transfer pricing system and we urge them to investigate this case urgently.”

HMRC, for its part, told GamesIndustry that around half of large UK businesses are under investigation for tax reasons but that it couldn’t comment on a specific case.

Rockstar is not the only large company accused of avoiding paying corporation tax in the UK. Multinational groups such as Amazon, Starbucks, Vodafone, and Google have come under fire in recent years for registering much of their profits overseas to dodge UK corporation tax.

GameSpot has contacted Rockstar for comment.

from GameSpot – Game News https://www.gamespot.com/articles/gta-red-dead-redemption-publisher-rockstar-accused/1100-6468724/

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