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UK Tax Watchdog Alleges Activision Blizzard, Rockstar Avoided Taxes

Dave Royse

Two separate reports from British think tank TaxWatch UK allege the video game companies behind "Candy Crush" and "Grand Theft Auto" should be paying more in taxes in Great Britain.

The think tank accuses Activision Blizzard, Inc. (NASDAQ: ATVI), an American company based in Santa Monica, California and the maker of "Candy Crush Saga," "Overwatch" and "World of Warcraft," of dodging British taxes by moving money into tax havens through subsidiaries.

It alleges that Take-Two International Software, Inc. (NASDAQ: TTWO), the maker of "Grand Theft Auto" and also an American company, avoids British taxes through an alleged scheme that allows the company to claim its British subsidiary Rockstar North Ltd., which developed GTA, makes no money.

Rockstar North has paid no British corporation taxes over the past 10 years, TaxWatch said in its report. 

Neither Activision Blizzard nor Take-Two responded to requests for comment from Benzinga. But TaxWatch did note that Activision Blizzard has said it is “now seeking to engage pro-actively with tax authorities to ensure it pays the right amount of tax.”

World Of TaxCraft?

Activision, which also publishes the "Call of Duty" franchise, has also drawn the attention of government tax regulators.

TaxWatch said in a report called "World of TaxCraft" that Activision is facing tax demands in France and Sweden, which the company says it will contest. It is also under investigation by U.K. tax authorities, the think tank said. 

TaxWatch said Activision reduces its British tax bills by sending revenue and royalties into Malta, Bermuda and other low-tax jurisdictions.

When players download "Candy Crush Saga" in the U.K., they agree that their purchase is actually being made from Malta-based King.com, where the effective tax rate is 5% versus Britain’s 19% rate.

“I expect many players of 'Candy Crush' would be outraged to find that the payments they make though the game are sent to a company in Malta, even though King, the Activision company behind the game, is managed from London,” TaxWatch Director George Turner said in a press release announcing the report.

GTA: Great British Export

"Grand Theft Auto" was first developed in the U.K., and TaxWatch noted it is sometimes called “the Great British Export.”

Rockstar North Ltd., is based in Edinburgh, Scotland, in the U.K. But while bringing in millions for Take-Two, Rockstar North hasn’t paid British corporate taxes and has claimed £42 million, or $51 million, in subsidies through a British video game tax program aimed at boosting the industry, the think tank said in its report on Take-Two.

“The situation is absurd,” TaxWatch said.

“Take-Two appears to believe that it is reasonable that close to 100% of the profit should flow to their U.S.-based parent companies and senior management, whilst almost no profit flows back to the UK companies involved in either making or selling the game.”

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