The Video Games Tax Relief fund is a newly established tax relief effort in the UK to encourage video game development on a domestic level. The funding effort was originally conceived by the UK government to help grow the presence of homwgrown media production within the country, with a particular aim for getting youth interested in new avenues of the economy through games and other media. But it turns out that the Video Games Tax Relief fund was taken advantage of by those who really didn’t need the help. Sega, Sony, and WarnerMedia are three major industry iconcs named in a report by The Guardian that stated multiple companies had applied for tax relief through the VGTR and were subsequently given such support. THe fund was given £324 million in total funding, and a system was devised to give each company a fair share based on their overall size and profits. But since major companies are taking up the majority of that funding, the VGTR is being depleted quickly.
Of course this is a problem, as it turns out that millions of pounds were expended through this program and went to various big names in the industry. The claims average at about £500,000 each in these problematic instances, taking up approximately 80 per cent of the total Video Game Tax Relief. Combined, more than £100 million was allegedly claimed by just these three companies. Sony has apparently taken up £30 million in funding through the fund. Sega has claimed £20 million in corporate tax relief, as has been revealed by the audit which revealed these findings. But the big culprit here is the multi-billion dollar firm, the American media and entertainment conglomerate, WarnerMedia. That last firm apparently claimed more than £60 million in tax relief, according to the Guardian.
The system was designed with various tiers in mind, with the smallest of studios being allotted a maximum of £50,000 in tax relief. Those smaller claims accounted for roughly half of all applications, but a much smaller portion of the overall funding, as only £10 million of the £324 million was allocated to these smaller companies. The bulk of the remaining funding was claimed in higher tiers though, in a clear breakdown of the system. The British Film Institute is supposed to take into account the overall profits and costs of game development for each company and score them, with a maximum score of 31 points allowing a company to claim up to 20% of production costs, to a maximum of £500,000 in each claim.
“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,” said Alex Dunnagan, a researcher at TaxWatch UK. He called these findings alarming, highlighting the program as “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.”
Clearly this is something that happens all the time. Multi-national megacorps often rake in billions of dollars in profit, all while paying little to no taxes. It still sucks that this happened to indie game studios too.