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The UK-based investigative thinktank TaxWatch has published a report digging into the finances of Grand Theft Auto developer Rockstar Games, and accusing the company of dodging corporate taxes while taking advantage of millions of pounds worth of UK-centric tax credits.
In short, the organization says that Rockstar allocated profit to its studios in a way that keeps its UK-based offices reporting small enough figures to continue to claim those tax credits, while reporting higher profits for its US-based locations.
“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.”
As an example of what it is talking about, TaxWatch estimates that Rockstar’s operating profit between 2013 and 2018 came in around $5 billion, but during that same period Take-Two and Rockstar-branded studios in the UK only reported £47.3 million (~$57.8 million) in profit before tax.
According to its research, Rockstar has paid no corporation tax in the UK across the past decade, and has claimed £42 million (~$51.3 million) in tax credits through Edinburgh-based Rockstar North between 2015 and 2017.
“Rather than a picture of success, the accounts of the developers of the game, Rockstar North, show that the company has earned so little that they have been eligible to claim tax credits from the government,” reads the report.
Rockstar has claimed around 19 percent of the tax credits distributed under that fund to-date, by TaxWatch’s count. In its report, the organization suggests that raises questions about if the relief is being properly targeted, since it was set up with the goal of supporting games that are “culturally British” from small- and medium-sized businesses.
Though the game is based in a fictional US city, Grand Theft Auto V was largely developed at Rockstar North in Edinburgh, Scotland and passes the program’s “culturally British” bar due to those UK roots.
“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," suggests the report.