Grand Theft Lotto: Rockstar North's Tax Relief is Obscene

By Rich Stanton on at

Rockstar North has a serious claim of being the UK's most successful developer. Every entry of its Grand Theft Auto series, particularly after the move to 3D, has sold extremely well. Grand Theft Auto V is now one of the best-selling games of all time worldwide, with over 115 million copies sold (and that's an old estimate) plus the ongoing and highly lucrative Grand Theft Auto Online. Red Dead Redemption 2 isn't on quite the same scale (what is?) but as of November 2019 had sold a not-bad 26.5 million copies.

Yet the latest in a series of revelations from Taxwatch UK shows that Rockstar is the greatest single beneficiary of tax relief in the UK games industry. The studio hasn't paid any corporation tax in at least four years. And as far as the UK's industry lobbying groups are concerned, that shows the system working as it should be. Here's a UKIE spokesperson: “Video Games Tax Relief is a forward thinking policy that shows the UK understands the significance of games as a leading creative industry. For every £1 invested into the games industry via the relief, it pays back £4 in gross added value into the economy.”

Well, they would say that. Entities like UKIE and TIGA are never going to say anything else, because their role is as industry cheerleaders. For years before tax relief was introduced by the coalition government in 2014, TIGA CEO Richard Wilson would pop up anywhere with a quote bemoaning our industry's competitive disadvantages, and the benefits of introducing tax breaks in order to better-compete with other countries. And there is a point here: the UK has global competitors who are willing to offer tax relief to the industry, and our nation should look to not just maintain but build upon its strength in the sector. As Wilson said when the policy was launched: "TIGA has been campaigning for video games tax relief for seven years because it will create jobs, boost investment and enable the production of more British video games."

What doesn't add up is how tax relief has played out. The intention behind the scheme, according to its architects, was not to give out sweeteners to the UK's biggest companies. Instead the emphasis at the time of launch was on small- to medium-sized enterprises (SMEs) which, the thinking goes, would use tax relief to both employ people and build themselves into commercially successful, tax-paying entities. Then-chancellor George Osborne emphasised at the policy's inception that "this is a key industry of the future and I want Britain to be one of its biggest centres. 95% of UK video games companies in the UK are SMEs."

Rockstar North has never been an SME in its history; Rockstar Studios Limited was founded to replace Grand Theft Auto's original developer, DMA Design, and so has always had a size and profile that can only be described as huge. It was the crown jewel of Dundee's game development scene until 2014, when it moved into new offices in Edinburgh.

Last year the company claimed £37.6m in Video Games Tax Relief, and in the five years since the scheme has launched has claimed a total of £80m. Conveniently enough, Grand Theft Auto V also launched in 2014, so we can view that figure in the context of over £6 billion in revenue from that title.

Of the 345 VGTR claims made last year, 315 were for less than £1m. We could fairly consider these applications to come under the SME banner, and these 315 applications between them were granted a total of £30m. Rockstar North’s £37.6m claim is larger than these 315 SME applications taken together (the remainder of £35.4m went to 29 applications for £1m+).

In response to the latest news, Rockstar made the following statement:

“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 1,000 highly skilled and long term jobs across London, Lincoln, Yorkshire and Scotland.

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.”

Rockstar certainly employs people across the UK, but does that mean it needs tens of millions in taxpayer subsidy every year? Here VGTR seems to have become unmoored from its initial principles, with the current situation saying very little about Rockstar's work, but a whole lot about the quality of tax advisors and financial lawyers it has been able to acquire. The latter give the loophole the veneer of legitimacy, squeeze every entitlement until the pips squeak, and will continue to exploit this system until they cannot. 2020's 'relief' is as good as in the bank, and who would bet it won't be even more?

To throw the baby out with the bathwater would be foolish: Video Game Tax Relief is a good policy, but it has proven a misconceived one. It is clearly open to abuse: the money overwhelmingly goes to enormous companies that are already highly profitable, with the situation getting worse every year, and the lion's share is going to huge companies rather than SMEs. This policy should be supporting the next DMA Design, not the current Rockstar North, and it needs a re-think that stops it being taken advantage of at such scale.

There are all sorts of ways these arguments get de-railed: some defenders of Rockstar will point to payroll taxes or even VAT, as if they're part of the argument, while others will emphasise the jobs and salaries the company provides in the UK. Still others would point to Rockstar North being a subsidiary of TakeTwo Interactive, which is headquartered in the US, and where all the profits ultimately go: which is to say that this is more about how it does or doesn't pay corporation tax.

But this policy is where the money's coming from, and there's only one word for over a third of the UK's annual VGTR going to Rockstar: obscene. This is one of the global industry's most successful companies, it makes money hand-over-fist, and should not be a beneficiary of public subsidy. Can anyone claim, with a straight face, that Rockstar needs it?

The ultimate fallback of this policy's defenders is that we don't want some of the great British success stories to leave our islands. No we don't. Then again, Rockstar is taking the piss, and sending out statements emphasising its own trickle-down effect. At that point, I wish we as a nation were prepared to say fine: eff off to Canada then, and don't let the door hit your arse on the way out.