An investigative thinktank called Tax Watch UK has accused Rockstar Games, custodians of the Red Dead Redemption and Grand Theft Auto franchises, of committing tax avoidance in the UK. A lengthy report on the organization’s website points a finger at the Edinburgh-based Rockstar North and some suspect incorrect reporting of sales figures from their parent company, Take-Two.
Tax Watch UK notes that the estimated operating profit of Rockstar between 2013 and 2019 totals a whopping $5 billion, as well as noting that £42 million in video games tax credits were claimed by Rockstar from the UK government between 2015 and 2017. That’s 19% of all the tax credits that the UK government paid to support the industry across those years.
Nevertheless, despite its huge profits and the support the UK has shown to the company, Rockstar North is said to have paid £0 in corporation tax in the UK between 2009 and 2018. Although some tax has been paid in those years, Rockstar has received more than enough support from the UK government to cancel it out.
One of the ways in which Rockstar is said to have gamed the tax system, according to this report, is by listing its profits outside the UK, with the company declaring a net loss in the UK over a ten-year period that ended in 2018. This is how the company allegedly avoided paying corporation tax in the UK, despite having had some hugely successful games over the last decade.
The report states: “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.”
“The situation is absurd,” the thinktank adds. “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.”
GamesIndustry.biz reached out to HMRC about the report, with a government spokesperson saying that around half of large UK businesses are being investigated for tax reasons. They couldn’t comment on any particular cause, though, no matter how alarming these accusations may be…