Who says CRIME DOES NOT PAY? ‘Money turned them into jackasses’ ‘Insanely smart and very good at being mean’
A video game celebrating robbery and murder, it's sold millions of copies worth more than $5bn. But the Scots firm behind Grand Theft Auto faces awkward questions over £40m tax breaks – and a VERY troubling court case
‘Corporate welfare scrounging at its very worst’
IT is the computer game which encourages players to channel their inner criminal. Fancy a spot of armed robbery? How about stealing a supercar and squelching some pedestrians? Both villainous fantasies and many more, all the way up to murder, are catered for in Grand Theft Auto V, the lovingly created celebration of lawlessness which has become one of the most successful entertainment productions of all time.
Revenues for the game, largely developed in Scotland, are almost £5billion – sales top 110million. By comparison, the world’s biggest selling album, Michael Jackson’s Thriller, has shifted less than half that number despite a head start of more than 30 years.
But six turbulent years after its release, are the wheels finally coming off for the key players behind the Grand Theft Auto (GTA) phenomenon? This week, Edinburghbased games developer Rockstar North was accused of staging a ‘drive-by assault on the British taxpayer’ after it was revealed the UK Government had given it tax breaks of tens of millions of pounds.
The reason for the special treatment? Bizarrely, the game populated with American criminals and set in a fictional city based on Los Angeles is reckoned to promote British culture.
Exacerbating the sense of financial delinquency attached to Rockstar was the revelation it had recorded a net loss for tax purposes and paid nothing in corporation tax between 2009 and 2018. Meanwhile, its US-based parent company Take Two reported a profit of £142million last year.
Then there is the fact the former boss of the Edinburgh operation, Leslie Benzies, has taken to lobbing missiles from outside. The Scot tried to sue Take Two and the English brothers who run it, Sam and Dan Houser, for £105million for allegedly denying him his share of a royalty deal designed to carve up the monies of
the games they worked on together. For these mega-rich creators of simulated chaos, it must seem life has finally begun to imitate their art. But unlike the onscreen version, the victims here are real.
It was an investigation by the think tank Tax Watch which threw up astonishing – if perfectly legal – peculiarities in the financial affairs of GTA V’s creator. What it boils down to, says Tax Watch director George Turner, is the Treasury missing out on millions of pounds in order to bolster the firm behind one of the most lucrative entertainment titles ever produced. He described Rockstar North’s actions as ‘corporate welfare scrounging at its very worst’.
His investigation found that in 2015 Rockstar managed to qualify for tax credits under the UK’s Video Game Tax Relief programme and in the past three years it has benefited from subsidies amounting to £42.3million.
In 2017-18, it saved £19.1million in tax relief – and the total claimed over three years amounts to almost 20 per cent of the overall sum awarded under the scheme. Understandably, perhaps, critics wonder what part of the lawless world depicted in GTA V can be said to promote British culture.
Among the tests applied to decide suitability for the funding are ‘diversity’ and ‘exploration of cultural issues’ such as disability and social exclusion. The Tax Watch report said: ‘It is unlikely that the drafters of that guidance had in mind a game which allows the player to murder prostitutes when formulating the cultural test.’
The GTA series has been mired in controversy ever since 1997, when it was launched in a two-dimensional format by Dundee-based DMA Design.
From the start, it featured carjackings, police chases and shootouts. By the third instalment, and following a takeover by Rockstar, it had moved to a 3D setting, giving the player the impression of being part of the amoral world onscreen.
Key to the game’s success was the free rein the player was given to create havoc. Murders can be committed with impunity; criminal rivals can be tortured. Now, in the latest online version, gambling has been added to the list of vices available to the player.
The idea is they use real money to buy pretend chips at the game’s newly launched Diamond Casino & Resort, opening up a fresh can of worms on whether this version of the game should be subject to online gambling legislation.
Not that the moral concerns have done anything to curtail demand. Indeed, it is arguable that no product in computer gaming history has been more hotly anticipated than GTA 6, which has reportedly been in development for years.
GTA’s phenomenal sales – each version shifting more than the last – have made rich men of the three principals involved, the New Yorkbased Housers and Benzies, who lives in Edinburgh. Indeed, the vast sum claimed by Benzies in his lawsuit hints at the staggering wealth swilling around in the company coffers.
How, then, can Rockstar North claim meagre enough profits to limit its exposure to corporation tax and be entitled to savings reserved for small-time developers with negligible international markets?
The answer, according to Tax Watch, is that Take Two’s controlling arm in America has hived off most of the GTA profits – reckoned to run into billions of pounds – while allocating only a small percentage to Rockstar North. Its profit last year was £8.3million.
That creates the impression the Scottish subsidiary is a much smaller player than it really is. Indeed, if Benzies’ claims to the New York Supreme Court are accurate, the Edinburgh office was pivotal to the development of the GTA series.
The Tax Watch report said: ‘It is our opinion that a more appropriate allocation of profit between the US and the UK would have
resulted in substantially more profit being allocated to the UK. This would have meant that Rockstar North would not be eligible for a payable tax credit. Instead, Take Two and the Rockstar companies should have had a substantial tax liability in the UK.’
It concluded: ‘Take Two appears to believe it is reasonable that close to 100 per cent of its profits should flow to their US-based parent companies and senior management, whilst almost no profit flows back to the UK companies involved in making or selling the game.’
Perhaps the London-born Houser brothers – both now American citizens – will be congratulating themselves on their chutzpah.
Sam Houser in particular used to enjoy the idea of world domination through his outfit’s market leading games. In a typically cocky email to Benzies in 2007, when they were still friends, he said: ‘Let’s make some cool f ****** s***, enjoy doing it, change the world, have some time off – then dominate the planet. We can. So why not?’
It was a very different story a few years later after the release of GTA V. Benzies was offered a six-month sabbatical to recharge his batteries – but returned to his office in Edinburgh to find his access credentials denied. Even when he managed to talk his way into the building the office manager escorted him out. The ‘sabbatical’, he claimed, was exile in disguise.
His spectacular falling-out with the brothers has its roots in a royalty agreement signed by him and the Housers in 2008. By then all were already rich – but GTA V, released in 2013, put them in the super-league. Disagreements swiftly ensued.
When Benzies was ultimately removed from the company with a severance package worth little more than £1million, the shadowy world of Rockstar became a battleground. In 2016, his legal team filed a 71-page lawsuit in New York, illustrating the extent to which the firm’s success was built on his programming genius.
He had come a long way from his bedroom in Elgin, Moray, where, said his lawsuit, he nurtured ‘the desire to create amazing video games’. He completed his first at 12 and, as a distraction from his parents’ disintegrating marriage, developed his skills rapidly.
Having dropped out of college and fathered a son, Christopher, at 18, Benzies was given a week’s trial at Dundee’s DMA Design, then Scotland’s most cutting-edge video games outfit. It was all he needed to prove his worth. When the company was acquired by the Housers’ Rockstar Games in 1999, he was a key figure.
The Scot and the Housers formed a three-man leadership team as the company grew. But as it did, so did the egos. Journalist David Kushner, author of a book on the GTA phenomenon, quotes a former employee as saying: ‘The money turned them into jackasses very quickly.’ Another ex-employee said: ‘These people are insanely smart and really good at being mean. They’re British.’
British, certainly, but from very different social backgrounds. The brothers were educated at St Paul’s, in West London, where fees are £30,000 a year. They were collected at the school gates in their father’s Rolls-Royce. The elder, Sam, was a classmate of former chancellor George Osborne.
While some Rockstar underlings bridled at the tantrums – the telephones thrown across rooms, the screaming matches – others said the volcanic tempers stemmed from the brothers’ perfectionism.
‘That’s the only reason the games are so good,’ said former Rockstar producer Mark Fernandez. ‘It was the most exhilarating, impassioned place – they were totally committed to perfection. Imagine a company where 100 people felt like they were in the Beatles.’
Benzies’ kingdom, meanwhile, was the company’s Edinburgh branch, Rockstar North. If employees there felt they were in the Beatles, no one let on. One outsider who penetrated its defences described rows and rows of operatives at computer terminals in an open-plan space with blinds drawn. Concentration was intense. No one spoke.
Branch president Benzies would receive regular chummy emails from Sam Houser, many of them acknowledging his debt to the Scot’s wizardry. Exactly why the relationship became toxic is unclear. One source of conflict was the online version of GTA V which, according to Benzies, was his baby. For that reason, he placed his name in the most coveted spot in the credits – last. But Sam Houser’s name normally went there and he was reported to be furious, ranting that his Scottish colleague ‘wanted to take over the company’.
The lawsuit said Benzies was invited to take ‘personal time’ since there were no games deadlines on the horizon. The offer may have appealed to him for several reasons. The pace of work at Rockstar was intense and the hours punishing. He had married Australian Kristin Hall in 2012, but it seemed the relationship was already in trouble. The couple divorced in 2015. But Benzies is adamant he always intended to return to his job when the sabbatical was over. The Housers, he says, had other ideas. His lawyer, Chris Bakes, said: ‘Mr Benzies’s sabbatical was actually used to erase his presence at Rockstar North, his employer of 18 years.
‘It was exile disguised as a deserved sabbatical. His key people were terminated. He was not allowed to meet with Rockstar colleagues. His BlackBerry access was terminated. And then, his return: at the scheduled end of the sabbatical, and without ever terminating him, Rockstar barred him at the company doors.’
The case is understood to have settled this year, but no details have been disclosed.
This week, as the British taxpayer digests the scale of handouts offered to the gaming giants, neither the Houser brothers, Benzies nor anyone from Rockstar North or Take Two has taken up the invitation to comment.
Rockstar has, however, previously said Benzies left his job over ‘performance’ issues and is due no further payment.
HMRC said large businesses aresubjected to an exceptional level of scrutiny to ensure they pay all taxes due under UK law. A Government spokesman said: ‘The UK’s worldclass creative industries – from films to video games to orchestras – are helping boost growth while championing culture and innovation both at home and abroad.
‘Thousands of claims for creative industry tax relief are reviewed each year. Claims are carefully scrutinised irrespective of the applicants’ history and must pass a cultural test – which considers criteria such as where personnel are based – in order for HMRC to approve it for tax relief.’
The level of tax relief allocated to the makers of this most morally dubious commercial phenomenon, when next these matters are considered, will make for fascinating reading.