Chutzpah, Thy Name Is Richer Over Rockstar’s GTA V Taxation

This is really quite, quite, lovely.

Grand Theft Auto’s £42m ‘heist on the taxpayer’
The developer of the hit game pays no British corporation tax but claims huge subsidies meant for British culture

They’ve broken no rules, got everything signed off, they’re undoubtedly legal. Richard Brooks – yea he of the Vodafone estimates – thinks it’s all terribly naughty though. At some risk to logic he thinks it’s naughty of course:

The 2009 Royalty Plan, which in reality was not a royalty payment but a profit share agreement, gave the Rockstar Principals and unnamed qualifying Rockstar employees entitlement to a bonus pool of 50% of the operating profits of games produced under the Rockstar label. Under the plan, the principals were entitled to no more than 60% of the total pool, with no individual able to receive more than 25% of the pool. When setting up the incentive schemes for the principals, lawyers agreed a side letter setting out the tax treatment of the payments the principals would receive.15 This letter makes clear that the remuneration would be paid as a service for employment, and that in the case of Leslie Benzies his employment was with Rockstar North Limited. The reason for this stipulation was likely to prevent the imposition of US employment taxes on his income, as part of the royalty plan involved assigning certain intellectual rights to a Delaware LLP which the three principals were partners of. However, despite this stipulation, the remuneration does not appear to be included in the Rockstar North accounts. It is not known whether and how much UK income tax has been paid by the principals on these profit shares.

That’s where all the money goes. Instead of being declared as a corporate profit it’s paid to the workers. Who then pay income tax upon it. Note that income tax rates are higher than corporation tax rates.

HM Treasury probably gets more money this way that it would if the Brooks desired system was used. But Brooks wants to complain anyway.

Ho hum.

And then we get into the realms of true chutzpah. The killing your parents then telling the judge you deserve leniency as an orphan levels of chutzpah. For who has been funding Brook’s “work“?

Funding
Seed funding for Taxwatch has been provided by Julian Richer, with active interest being shown by further major donors.

Oh, right. That’s this Julian Richer is it?

Isn’t This Tax Abuse? Julian Richer Sells Richer Sounds Without Paying Capital Gains Tax

Yes, it is. That Julian Richer:

Now isn’t this interesting? Julian Richer is selling Richer Sounds, his audio retailing company. Which is great, obviously, we always like to see those who have done well cashing in. But the thing is he’s structured the sale in a manner that means he doesn’t have to pay any capital gains tax. Yes, that’s right, one of the dynastic fortunes of our time will be monetised without the Treasury getting even a sniff at it. It should be pointed out that this is all entirely legal.

The man who paid no tax on the sale of his business is funding Richard Brooks to complain about other people paying more tax on their incomes from business.

Now, I know people who shout that obeying the tax law exactly as it is written is tax abuse. I’ve even got into an argument with Richard Brooks, one of the people being funded by Julian Richer, on the point. Brooks insisting that Vodafone obeying the law on controlled foreign companies was tax avoidance, me insisting it wasn’t. But of course this is different. Entrepreneur cashes in his life’s work without paying capital gains or income tax. Yes, that’s obviously different because reasons. Julian Richer is entirely and absolutely obeying the law here. What’s going to be interesting though is the reaction from those tax campaigners who complain so bitterly when others do exactly the same, entirely and wholly obey the law.

We might now have our current day definition of chutzpah.

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Leo Savantt
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Leo Savantt

We might try abolishing corporation tax, potentially a higher tax take, a big incentive for corporates to base themselves in the UK and greater profitability for companies small and large.

Is there any good reason not to?

Quentin Vole
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Quentin Vole

As long as we simultaneously abolish the (basic rate) tax exemption for dividend payments.

Jonathan Harston
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Jonathan Harston

Computer games aren’t “culture”? By whose definition? I remember when computer games sales passed music sales, and that was in the era of £4.99 for Jet Set Willy II.