A new report by investigative think tank TaxWatch UK states Grand Theft Auto V developer, Rockstar North – which is thought to have generated around £4 billion in operating profit between 2013 and 2019 – has not paid UK corporation tax in the last ten years. The allegations also accuse the company of claiming more than £42 million in tax relief during that time – allegedly 19 per cent of the total tax relief paid to the entire UK video game industry since 2014.
Grand Theft Auto V remains one of the most profitable and critically-acclaimed video games, breaking numerous records on, and since, its release, including generating £1 billion within its first three days on sale.
Now, however, TaxWatch – which says it monitors and reports on the tax payments of large companies working in the UK, and provides the unbiased and independent information necessary to allow the public to hold the government and major tax payers to account – questions the “absurd” situation in which the company reportedly paid no corporation tax between 2009 and 2018. It also asks why Rockstar’s parent company, Take-Two Interactive, believes “that it is reasonable that close to 100 per cent of the profit should flow to their US-based parent companies and senior management, while almost no profit flows back to the UK companies involved in either making or selling the game”.
As The Guardian explains, games must pass a British Film Institute cultural test in order to qualify for tax relief in the UK. The think tank says video games tax relief was designed to help smaller producers of “culturally British” games and was not designed for the international market.
To establish a “significant contribution to British culture”, games must satisfy a number of criteria and are points for elements such as British characters, or British settings. Despite being set in the fictional Los Santos, a city modelled on Los Angeles in California, GTA V nonetheless qualified as a culturally British video game for this tax break in September 2015, reportedly after the game had already recorded more than £3bn in sales. The certification allegedly allowed the producers of the game “to claim tax relief on production costs”.
When introducing the relief fund, TaxWatch states the government reportedly estimated that only around 25 per cent of games produced in the UK would qualify, and “that the major beneficiaries would be small games producers interested in the local market”. The government expected only 10 per cent of games that qualified for the relief would have a budget of more than £5m.
TaxWatch UK asserts that while “there is no evidence that HMRC has challenged this set-up” there is also no evidence that “Take-Two or any of the individuals named in this report has acted illegally”. Rockstar North itself did not respond to The Guardian’s requests for comment.
“It is outrageous that the UK taxpayer is being asked to shell out tens of millions of pounds in subsidy to the developers of Grand Theft Auto, when at the time that the game’s developers put in their tax credit application Grand Theft Auto V had already generated several billion dollars in sales and profits,” George Turner, the director of TaxWatch, told the Guardian. “This is a drive-by assault on the British taxpayer and corporate welfare scrounging at its very worst.
“The Video Games Tax Relief was designed to help developers of games with a cultural content that would struggle to sell in the international market. The fact that such a large amount of that relief is going to the developers of Grand Theft Auto clearly shows that the relief is not working as intended.”