Rockstar Games are supposed to be a British business success story. They’re one of the biggest names in the video games industry, and they’ve made billions of dollars through global hits like ‘Grand Theft Auto’ and ‘Red Dead Redemption.
In the eyes of many gaming fans, they could do no wrong for years, but now their reputation has hit the skids after the revelation that they’re doing everything they can to avoid paying tax in their home country.
The accusation that the gaming giant might not be paying their fair share was started by an independent group by the name of Tax Watch UK, but has since been picked up and run by larger news organizations such as The Guardian, who have assessed the information provided by Tax Watch and concluded that Rockstar may have a case to answer when it comes to failing to pay their fair share of the profits they’re making.
While stopping short of accusing Rockstar of tax evasion, which is a crime in the United Kingdom, the company faces accusations of tax avoidance – a method of presenting financial reporting which is designed to minimize (or completely eliminate) tax liabilities which would otherwise be deemed payable.
All Take And No Give
If the reports are determined to be true, it’s a particularly galling activity from Rockstar’s point of view. The Government of the United Kingdom has invested heavily in creative industries in recent years via initiatives such as providing tax breaks and tax credits to video game companies. Rockstar has benefited extensively from these schemes; in the two years from 2015 to 2017 the company claimed £42m (approximately $50bn) in tax credits from the Government. That figure is equivalent to a fifth of all tax credits awarded to video game companies during that period.
With the release of the fifth ‘Grand Theft Auto’ game and the second ‘Red Dead Redemption’ game, the past few years have been especially profitable for Rockstar. Tax Watch says that the company’s operating profit from 2013 to 2019 exceeds five billion dollars. During that period, despite being based in Scotland, they haven’t paid a single dollar on corporation tax back into the treasury. They have paid some other taxes, but the total amount of tax Rockstar has paid out is less than the amount they’ve received in tax credits. They’ve therefore effectively taken money out of the pockets of British taxpayers during a decade where they’ve been making big money consistently.
Moving The Goalposts
To avoid paying tax, it’s thought that Rockstar has filtered money through their network of companies and then waited until it’s safely offshore before declaring it as profit. The activities of two such companies – Rockstar North and Take Two – have come in for particular scrutiny, as it’s thought that the sales figures reported by Take Two are improbable. To explain the situation in basic terms, Rockstar appears to have under-reported sales in the United Kingdom, and over-reported sales in the United States of America to balance out their books. Had UK sales been accurately reported, it would have been unlikely that the company would have stood to receive any form of tax credit from the British Government whatsoever, and would instead have faced a large tax bill.
Playing A Dangerous Game
The reports about Rockstar’s questionable tax activities round off a miserable summer of news for the company. After launching their much-hyped in-game casino in ‘Grand Theft Auto 5’ earlier in the year, they’ve found themselves in a legal battle with more than fifty countries who are currently blocking access to it. Despite the fact that real money cannot be won and withdrawn from GTA’s casino games, the fact that chips can be bought with real money is enough for the game to fall foul of complicated gambling laws in many sovereign states.
Although gambling is legal in the majority of countries where the game can be played, online gambling is only legal in some of them such as Late Casino. In countries like Canada, for example, mobile slots websites are only able to operate within the nation because the servers that host them are based outside the country. While slots can be played in physical casinos, online slots and mobile slots are prohibited by law – often because gambling legislation in many nations was written at in an era before mobile slots became a reality. That’s left the countries playing catch-up – and Rockstar finding that their new income stream isn’t as lucrative as they hoped it might have been. Given that they appear to have been inviting the UK treasury to play a game of mobile slots with their tax revenue – i.e. place a bet on whether or not they’re going to get a payout, and then giving them nothing – it’s a little harder to feel sympathy for them now than it was a few weeks ago when news of the casino difficulties first broke.
A Storm Brewing?
Various news agencies have approached Her Majesty’s Revenue and Customs – the body that oversees the collection of tax (and punishment for failing to pay it) within the UK – for comments about Rockstar’s situation. True to form, HMRC has reiterated their standard line – they don’t comment on any specific ongoing investigation. They have however provided an interesting caveat – at present, they say that around half of the large companies who operate within the country are being investigated in relation to their tax reporting and tax payments.
Rockstar has always had a cool image. They make edgy games for edgy players, and were once seen as the rebels of the video gaming world. That might still be true, but there’s nothing rock and roll about refusing to pay into the same pot as everybody else when it comes to funding a country’s public services – and if the reports are true, then claiming tax credits and then failing to pay tax back into the system amounts to theft from the same people you’re relying on to generate a profit for your business by buying your games. ‘Grand Theft Auto’ we can get on board with. ‘Grand Theft Social’ is a game nobody should be playing – and Rockstar least of all.