Rockstar responds to tax avoidance criticism, says UK tax relief is 'a proven success'

In response to criticism that it's taking unfair advantage of a game developer tax rebate, Grand Theft Auto developer Rockstar Games has issued a statement saying that the program has directly resulted in the studio creating "well over 1000 highly skilled and long term jobs" throughout the UK.

The criticism originated with Tax Watch, a UK-based "investigative think tank" that monitors and reports on the taxation situations of large companies and wealthy individuals in the country. In a report entitled "Rockstar Takes the Pot," the organization said that Rockstar's claims under the Video Games Tax Relief program in 2018/19 accounted for 37 percent of all claims made by the UK game industry that year, and that despite recording sales of more than £6 billion ($7.8 billion) on Grand Theft Auto 5 since 2014, it has paid no UK Corporation Tax for the past four years.

"The accounts for 2019 show that the company claimed £37.6 million in Video Games Tax Relief, taking its total to £80 million since the scheme was introduced," the Tax Watch report says. "Of the 1110 claims made since VGTR was launched, Rockstar have accounted for a quarter of all the relief claimed from the government, whilst publishing only two games that qualify for the relief."

The UK's Video Games Tax Relief program came into effect in 2014, and based on this pre-approval consultation report  was expected to be "of particular benefit to small and medium-sized businesses," which make up the vast majority of the UK's game industry. However, "all companies in this sector are eligible" for the program, in order to avoid competition for tax breaks within the industry.

One of the pre-approval criteria cited in the consultation is that the relief program be "sustainable and not open to abuse," and that it should be "create substantial additional avoidance opportunities" for company that take advantage of it. Avoiding £80 million ($104 million) in tax payments since the program was introduced seems pretty substantial to me, but Rockstar defended its claims in a statement sent to VG247, saying that the system is working exactly as it's intended.

"The UK’s program to support the growth of a broad range of creative industries through tax relief is a proven success. The program has directly resulted in Rockstar Games significantly increasing its investment in the UK, creating well over 1000 highly skilled and long term jobs across London, Lincoln, Yorkshire and Scotland," a Rockstar rep said. 

"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 videogame development well into the future."

Ukie, the UK's game industry trade group, also described the Video Game Tax Relief program as "a forward-thinking policy that shows the UK understands the significance of games as a leading creative industry."

"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," it said. "But even more importantly, VGTR directly supports 4320 high productivity full time jobs in game development roles—nearly a third of our entire development workforce—across the country."

Rockstar is far from the first big videogame industry player to come under fire for not paying taxes in the UK: A report by The Guardian in October 2019 noted that companies including Warner, Sony, and Sega had also used the program to claim significant tax offsets.

Interestingly, the Tax Watch report also speculates that a new Grand Theft Auto game is in the works, stating that "the huge claims being put in by Rockstar are likely related to the production costs of GTA6." I don't think that the ongoing development of a sequel to the best-selling game of the past decade, which is now more than six years old, really qualifies as news, however.