Rockstar North has used tax programs and other smart accounting to avoid paying corporate taxes in the UK for years, even while its most successful game Grand Theft Auto V has sold millions of copies and made billions of dollars.
That situation is detailed in public tax filings for Rockstar North, Ltd. and highlighted in a searing report released this weekend by a group called Tax Watch, which describes itself as an “investigative think tank” and has previously gone after Google and Starbucks for supposed tax avoidance.
“This is a drive-by assault on the British taxpayer and corporate welfare scrounging at its very worst,” the group’s director George Turner said in a press release promoting the report over the weekend. A representative from Rockstar declined to comment
Rockstar Games is headquartered in New York City and has studios around the world, but for much of the mega-studio’s existence, the bulk of the work making the GTA games has been done in Scotland at Rockstar North, which functions as its own company for financial purposes. In 2018, Rockstar North reported profits of £8,300,782, or just over $10 million. All the while, it paid nothing in UK corporate taxes, thanks in large part to claiming more than £19 million (or $23 million) in tax credit through the UK’s Video Game Tax Relief program, which Rockstar managed to qualify for in 2016. That government program was designed to financially support British games and requires them to contain British themes and/or be crafted by a lot of British people, the latter of which probably qualified Rockstar.
The Tax Watch group calls the situation “absurd,” saying the program was intended to help smaller game makers and not spare one of the most successful game companies in history from paying corporate tax. They are especially scornful of the accounting that seems to cast creating GTA as a barely-profitable enterprise for Rockstar North, as U.S.-based publisher Take-Two claims most of the revenue for itself.
“Take-Two appears to believe that it is reasonable that close to 100% of the profit should flow to their US based parent companies and senior management, whilst almost no profit flows back to the UK companies involved in either making or selling the game,” the Taxwatch group says in its conclusions. “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.” The group urges the UK government to reconsider its tax relief plan.
Rockstar North presumably has paid taxes on employee income and Value Added Tax, Taxwatch director Turner told Kotaku, but he noted that those tax bills are not publicly available.
As for Take-Two, which also publishes the NBA 2K series, Civilization, and more, the company reported a profit of $173 million in 2018. That included a nearly $37 million tax benefit.