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News video games 02 October 2019, 23:01

author: Michael Kulakowski

Not Only Rockstar - Sony and Other Giants Avoid Paying Taxes in UK

As it turns out, Rockstar is not the only company that avoids tax authorities in Great Britain. Using methods similar to those of the creators of GTA V, giants such as Warner, Sony and Sega earned hundreds of millions of pounds in tax credits. They were all beneficiaries of a scheme intended to support domestic video game developers.

Not so long ago we wrote about the turmoil that broke out after it turned out that Rockstar Games, which developed the most profitable video game in history, benefits from huge tax reliefs in Great Britain and has paid virtually no money to the state budget for almost a decade. A report published today by the British newspaper The Guardian revealed that other big companies in the industry had been avoiding paying taxes in Britain for years using the same methods as the creators of the GTA series. This includes Warner Media (owner of the British teams at Traveller's Tales [LEGO series]) and Rocksteady (Batman: Arkham), as well as the European subsidiaries of Sony and Sega. Among the three companies mentioned in the report, Warner Media has gained the most, avoiding paying taxes in the amount of GBP 60 million within a few years. In a similar period Sony gained 30 million pounds and the European branch of Sega - 20 million.

The use of state subsidies and reliefs, as well as the avoidance of taxes is just another day at the office for the giants of the industry. Apart from Warner Media, Activision takes place in the top, having hidden its profits in tax havens for years.

Let remind that the case is connected with the Video Games Tax Relief program, the introduction of which has been demanded for years by representatives of the development industry in the Isles. In theory, it aims to help small, local developers to create games that promote British and European culture. Its participants may receive a 20 % reimbursement of their inputs in the form of tax credits. They are available in several options depending on the budget of the title. The highest is for projects worth more than half a million pounds. However, only the largest developers, such as Rockstar, submitted applications in this category. Interestingly, they consumed more than 80% of the funds allocated to the entire programme, which cost British taxpayers a hefty amount of GBP 324 million. Meanwhile, more than half of successful applications were submitted for projects in the lowest category, worth just GBP 50,000.

As The Guaridan notes, this enabled a very limited number of foreign companies to earn hundreds of millions of pounds intended for domestic developers. One of the arguments put forward by supporters of subsidising giants are the jobs they create, but as the newspaper notes, it is practically always a pipe dream. International companies are only interested in profits and can easily use the front end of the British studio while shifting the burden of development to other, cheaper countries. On the other hand, according to a report by the programme's creators, every pound invested in the programme brings the economy profits of four pounds a year.

The blame for the situation also lies with the legislators, who have very vaguely defined the conditions for receiving the credits. Thanks to that, games such as GTA V and Batman: Arkham Knight were included in the program. Participating of a game in the programme is assessed by the British Film Institute and must meet 16 out of 31 conditions of British and European identity. The criteria include, for example, the presence in the title of places or characters from the United Kingdom and the representation of the unique culture of the country. However, many of them are very general or related to the employment of professionals living in the UK or countries of the European Economic Area. For example, you can earn a point by just using the English language in the game.

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