Activision Blizzard Is Accused Of Tax Evasion

A UK think tank called TaxWatch detailed how more money was pulled out of the company.

A forewarning, it is going to be complicated. Despite both Activision and Blizzard being headquartered in California, they have technically sold their IP rights to a Bermuda-baed company (ATVI C.V.), and a Barbados-based one (ATVI International SRL). Then, these two license their IPs to a fourth company, the Netherlands-based Activision Blizzard International B.V., which itself is responsible for Activision and Blizzard rights outside the United States of America. This company is profitable, but most of its profit is paid out in royalties to the tax haven companies, such as ATVI C.V, which has no employees, and yet, it received 5 billion euros in royalty payments between 2013 and 2017. In 2017, ATVI C.V. sold some of its IPs to ATVI International SRL, but no public information of this transaction is available. (Meanwhile, the UK government is rolling out a new tax on royalties derived from the UK that are paid out to tax havens – the new tax will apply to royalties transferred to Bermuda. Barbados is exempt from this rule, as they already have a tax treaty with the UK.) Also in 2017, Activision Blizzard International BV reported that their pre-tax profits were 55.6 million euros. However, they had 1.3 billion in royalty payments, and because of it, they only had to pay 7.2 million euros in taxes.

TaxWatch also took a look at King (known for Candy Crush), a subsidiary of Activision Blizzard. Despite them being headquartered in London on paper, the British arms of the company only earn money via management fees from other King companies. The American players’ money goes to a Delaware-based company, while outside the US, most of the cash flows into a company based in Malta. Both the UK and Sweden are investigating this behaviour, and the latter country already issued a 400-million dollar tax bill for „alleged intercompany asset transfer.” Activision Blizzard will „vigorously contest” this bill, as well as 652-million dollar demand from France’s tax authority for practices at one of its French subsidiaries from 2011 to 2013. Meanwhile, in the United States, the IRS (America’s tax authority) determined that ATVI C.V. should have paid more to the US Activision and Blizzard outfits for their IP rights. The settlement resulted in them paying additional 1.4 billion dollars to the US counterparts of Activision and Blizzard, as well as an additional 345 million in taxes for IRS.

„The use of royalty payments to move billions in profits to offshore tax havens is common in the digital sector. The UK government has tried to introduce rules to deal with these schemes, however, these new rules are known to be ineffective because of how several tax haven jurisdictions are exempt from them. The case of Activision Blizzard is just another example demonstrating the need for governments to introduce more effective measures to deal with royalty-based tax avoidance schemes. In the UK this means changing legislation to make sure that royalty payments made to companies in jurisdictions where the UK has a tax treaty are included in the charge to income tax,” TaxWatch writes.

Dodging taxes in such a big publisher is… unusual to see.

Source: Gamesindustry

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Anikó, our news editor and communication manager, is more interested in the business side of the gaming industry. She worked at banks, and she has a vast knowledge of business life. Still, she likes puzzle and story-oriented games, like Sherlock Holmes: Crimes & Punishments, which is her favourite title. She also played The Sims 3, but after accidentally killing a whole sim family, swore not to play it again. (For our office address, email and phone number check out our IMPRESSUM)

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