Rockstar North, the UK-based subsidiary of Rockstar Games, popular for developing titles such as Grand Theft Auto and Red Dead Redemption, was reported to have not been paying corporation tax over the last ten years — all due to legal loopholes that are not actually meant for them to take advantage.
In a report provided by investigative watchdog TaxWatch UK, it has shown that the company has been making at least $5 billion in direct revenue for its parent company Take-Two Interactive for the years 2013 to 2019. However, there was not a single filed corporation tax payment for all of these profits. In fact, no tax payment was ever paid to start in 2009.
This was all due to the somewhat questionable management of profits and funding by Take-Two Interactive, who, according to the same report, diverted almost all of its profits to US-based parent companies. This then left no profits to be recorded off its UK-based companies, thus technically exempting them from paying huge amounts of taxes from the UK-based but multi-nationally recorded profits.
Even more egregious, Rockstar North even received more funding from the government by availing for the video games tax relief scheme, a system set up in 2014 to help smaller developers and gaming companies to aid in the growing gaming industry of the UK.
All in all, availing in the scheme allowed the company to receive an additional £42 million ($51 million) in subsidies, which is in addition to the billions of dollars that the company technically earned from game sales.
Learn more: EA Surprise Mechanics
As for the actual requirement of the tax relief scheme, games created by the applying game company must pass 16 of the 31 points of the required British attribution of the game’s characters, settings, lore, or anything that could promote cultural diversity for the UK. The game that Rockstar North applied for? None other than the 2015 title, Grand Theft Auto V.
It is quite sad to think that something that was built by the government to support smaller corporate entities is being taken advantage of and abused ad infinitum by these types of companies. Big corporate entities that, in our technical viewpoint, is already way beyond needing such systems, and are just riding on the same wagon to squeeze every dollar that they can out of their business operations.
Even more problematic, is that by all technical accounts, Rockstar North, or even Take-Two Interactive, are not doing anything illegally. People who think this is unfair are not in a position to start pointing fingers, because according to current law, they are not doing anything wrong.
Which finally points to the current flaw of the legal system itself. Just like the surprise mechanics fiasco earlier this month, there is a dire need to review and reevaluate current laws in order to update them with the fast-moving trends of technology.
Such is the constant reminder given to us not only by this new incident, but older ones such as the wild case of Oculus Rift versus Zenimax, the Facebook privacy lawsuit, or even the more recent failings over the UK Gambling Commission’s decision about in-game loot boxes.