Earlier this year, there was a report that concluded that Rockstar North has not paid corporate tax in ten years because of the Video Games Tax Relief which reduces the taxable profit of a video game developer. Now, a new report done by The Guardian reveals that several other large video game companies have also avoided paying millions in UK tax. These companies include Sony, Sega, and Warner Media.
The report done by TaxWatch showed how Rockstar North has claimed $42 million in subsidies from the taxpayer in the form of credits through the VGTR. Developers can deduct an extra 25% of qualifying expenditure from their taxable profit.
Speaking on the new findings on Sony, Sega, and Warner Media, Alex Dunnagan, a researcher at TaxWatch said this shows how the scheme has “become a cash cow for large, tax-dodging multinational corporations who are milking the system to extract hundreds of millions of pounds in subsidies from the British taxpayer. It is clear to me that much of the subsidy is unnecessary, as many of these corporations were producing hugely popular games since long before the introduction of VGTR.”
Jo Twist, head of Ukie, the UK trade body that represents the games and interactive entertainment industry said that the VGTR “played an important role in making the UK one of the best places to make games in the world.”
Warner Media has claimed up to £60m in corporation tax relief. Warner Media owns the British game development companies that make the Lego and Batman: Arkham series, Traveller’s Tales and Rocksteady Studios. Sony has claimed almost £30m while Sega has claimed up to £20m.
The VGTR has remained popular with large video game companies as well as the smaller independent developer. One independent developer told The Guardian that the VGTR was “crucial to keeping the lights on.”
Several years of review went into seeing if the policy of the VGTR was unfair or not. The European Commission concluded that it was after stating that it had been convinced VGTR would focus on “a small number of distinctive, culturally British games which have increasing difficulties to find private financing”.
A review done by The Guardian suggests that the VGTR may not have done what it said. Close to half of all the relief went to four large foreign-based companies. Scores of games that have few, if any, apparent British cultural references have been awarded large rebates.Official figures show VGTR was also overwhelmingly more lucrative for larger-scale video game projects. Claims for more than £500,000 have taken at least 80% of the total tax relief, despite accounting for only a small fraction of claims. These were dominated by big developers. Claims for big-budget games are larger due to their higher costs but smaller, low-budget developers have recieved less of the pot. They were granted roughly £10m of a total of £324m in tax reductions after accounting for more than half of successful claims.