A few months ago there was a story about Rockstar Games, one of which puts the company in a questionable position, because it involves the company’s taxes. Rather the taxes they didn’t pay but did inherit through a loophole, one of which is made to bolster the UK’s game developing talent. The tax relief side lets a developer claim an amount of money with the sole purpose of the game being “Culturally British;” from Rockstar that’s hard to say as their last game set in the UK was released last millennia. Of course, they always include a British voice actor for somethings, though Gavin’s Friend can die in a ditch!

Nevertheless, the story crops up again as the studio has taken another £37.6 million in the form of this tax relief. Of course, the developer made two of the largest games of this past generation in Grand Theft Auto V and Red Dead Redemption 2. Both games saw multiple releases and both games are generating a massive amount of profit for the studio. As an example, GTA V alone made six billion dollars between 2013 and 2018. This is ignoring that Rockstar North, the head of the Rockstar development team, is owned by TakeTwo Interactive; combining 2K and Rockstar, TakeTwo had $1.542 billion in cash and investments as of June 2019 (Q1 2020).

Not only was the parent company profiting, but Rockstar themselves were also making huge waves during 2018 with Red Dead Redemption 2. The developer made a mind-numbing $725 million in the first week of release from the game, which has since been ported to PC for both the Epic Games Store and Steam. One wouldn’t be hard pressed to assume that the profits were not as high but similarly out of most of our price ranges. Many would assume the Scottish developer with many studios throughout the UK and world would be paying tax, not receiving it.

It turns out that TaxWatch, which you might have seen in such classics as the last “Rockstar were caught taking this relief money” article, has weighed in. Now many assume that with the company taking a further £37.6 that they are working on the fabled Grand Theft Auto VI, which may be possible. It has been several years since the release of the previous game, and the last remnants are being sapped out of Grand Theft Auto Online. Development may have shifted from the early stages of production to stages where the studio could reveal a trailer within the next several months. Of course, this year is a big one for new console releases by Sony and Microsoft.

However, in response to TaxWatch and VG247‘s coverage of this tax relief both Rockstar and UKIE have taken to defend the relief. UKIE (UK Interactive Entertainment Association) specifically is a group we previously spoke about this week, when they defended loot boxes being sold to children. This was after the NHS mental health director said they were teaching kids to be addicted. There is an apt parallel regarding their relationship to the industry; as the NRA advocate for freedom with gun ownership in the U.S, UKIE advocate on behalf of publishers and developers rather than consumers. UKIE’s priorities are not consumers or taxpayers, they are beholden to publishers.

A Rockstar rep told VG247: “The UK’s program to support the growth of a broad range of creative industries through tax relief is a proven success.” Continuing with, “The program has directly resulted in Rockstar Games significantly increasing its investment in the UK, creating well over 1,000 highly skilled and long term jobs across London, Lincoln, Yorkshire, and Scotland.” Ending with, “This investment and the success of British video games supported by the program not only significantly contributes to the economy, and to UK tax receipts, but also helps solidify the UK’s position at the forefront of video game development well into the future.”

While true that the company is offering a small number of highly skilled jobs, the tax relief is predominantly shared among a few big companies, according to TaxWatch. According to the watchdog, since 2014 WarnerMedia has claimed a total of £60 million, while Sony has claimed £30 million, and Sega a meager £20 million. The latter’s foremost export from the UK would be Sports Interactive’s Football Manager series. Sony, of course, published Dreams, Wipeout, and Driveclub to name a few, while Warner mostly publishes Lego games by TT Games and the Batman: Arkham games by Rocksteady.

In a statement on the Video Game Tax Relief (VGTR), UKIE said that it is a “forward-thinking policy that shows the UK understands the significance of games as a leading creative industry.” A statement that may be true, but if TaxWatch is right in their own statement on who is getting the biggest share of this relief it isn’t very forward-thinking. Surely one would want new jobs and new studios starting rather than the biggest studios having monopolies? Warner, Sony, and Sega are all publishers external to the UK; TakeTwo is also a U.S company, but Rockstar are “self-publishing.”

UKIE went on to say, “We know that VGTR delivers a great return on investment for the taxpayer. For every £1 invested into the games industry via VGTR, it pays back £4 in gross value add into the economy. But even more importantly, VGTR directly supports 4,320 highly productivity full-time jobs in game development roles – nearly a third of our entire development workforce – across the country.” My question against that would be that four pounds in tax, is that just paid by workers or are these developers and publishers paying corporate tax too? According to TaxWatch, Rockstar didn’t pay any corporation tax between 2009 and 2018.

UKIE finished with “This helps businesses based everywhere from Dundee to Brighton to play on the global stage while allowing local communities to benefit from great jobs fit for a digital age. The UK enjoys a global reputation for creative excellence in game development. Now is the time to continue to support an industry that drives inward investment, exports globally and provides a world-beating showcase [SIC] of the skills the UK has to offer.” I would also forget about everything just above Fife too, but this comes off as large and established studios only.

If this relief is meant to incentivize growth in the industry, one has to wonder why Rockstar, arguably the UK’s biggest developer, is allowed to take 37 percent (the majority share) of the tax relief money. Last spring when Starbreeze was running at an overall loss of 167.3 million Swedish Krona ($174 million), Rockstar stepped in to buy an eight million dollar stake in Dhruva Interactive. So the studio has money, however, it is neither paying tax or taking the minority share in a tax relief scheme. Rockstar’s games aren’t the pre-requisite “culturally British” nor are they providing greater depth in the games industry.

Surely if the relief is aimed at helping studios develop jobs in the industry the studios getting the majority cuts should be similar to that of Supergiant Games. A studio of 20 people that started work in a house with fewer numbers working on four large-scale indie games in a decade vs a studio of employees between 1001 and 5000 making two games. Something tells me that a smaller studio that may be working out of a home might need tax relief to get into an office, hire more staff, and pay people fair rates for fair hours.

UKIE and Rockstar may be right in their claims that jobs are being provided, there are small increases to the economy, and it is spread out across three countries in the UK. Nonetheless, Rockstar should be paying their tax, and an estimated £190 million should not be spread between just four considerably large companies. According to TaxWatch, 315 of the 345 claims last year for the VGTR were for less than £1 million, combined the number of their claims is £30 million. Meanwhile, Rockstar has claimed more than that combined this year, while over six years three other companies have claimed similarly large amounts.

Phenixx Gaming is everywhere you are. Follow us on Facebook, Twitter, and Instagram.