A recent think-tank report has claimed that Activision Blizzard — the publisher behind big named titles such as Call of Duty, Candy Crush and World of Warcraft — has moved billions of dollars of profit into tax havens.
The report conducted by the investigative think tank TaxWatch focuses on funds moved into various tax havens across the globe, including countries such as Malta, the Netherlands. Most notably, around €5 billion has ended up with subsidiary companies in both Bermuda and Barbados between the years 2013-2017.
Activision Blizzard is listed on the New York Stock Exchange, and as of August 2019 has a market cap of $37 billion — which surpasses the likes of other large video game publishers such as Electronic Arts, Take-Two Interactive and Ubisoft. After several successful mergers, the company is divided into three groups: Activision, Blizzard and King. Blizzard merged with Activision back in 2009, with King forming a separate group under the Activision Blizzard umbrella.
In the past, the company has had run-ins with several different tax administrations. Activision Blizzard recently settled with the Internal Revenue Service in the U.S. after an examination of the company's 2009-2011 tax returns. It was forced to make an additional tax repayment of $345 million.
More recently, Activision was asked to pay back a hefty $652 million by the French Tax Authority (FTA) in 2018. This was following an investigation into one of the company's subsidiaries for the tax years 2011-2013. The Swedish Tax Agency (STA) handed the company a bill for $400 million for the 2016 tax year.
Activision Blizzard has stated in their 2018 Annual Report that they disagree with both decisions from the FTA and the STA and that the company will "vigorously" contest both rulings.
In the UK, HMRC is currently in discussion with Activision Blizzard UK Limited over the company's international business model. £8.5 million has been set aside in relation to tax investigations now underway — which date back to 2013. This £8.5 million equates to nearly half of the total tax that Activision Blizzard UK Limited has been liable for over the past ten years.
These investigations are down to alleged "transfer pricing" which is an accounting practice that is often used to move profits into lower tax jurisdictions.
Activision Blizzard told the Sunday Times, "We have proactively engaged with, and continue to fully collaborate with, both HMRC and other tax administrations globally, to agree to the proper amount of tax due in each jurisdiction during a period of changing policies and rules.”
TaxWatch director George Turner had this to say when summarising the report:
"With the revelation that Activision Blizzard is currently under investigation by a number of tax authorities around the world, and facing a potential liability of more than $1bn in taxes and penalties, the company is taking tax avoidance in the video games industry to the next level.CEO Bobby Kotick announced the company's financial results for 2018 were "the best in our history" earlier this year, despite the simultaneous rumours that Activision Blizzard was laying off around 800 employees – 8% of their total workforce.
"I expect many players of Candy Crush would be outraged to find that the payments they make through the game are sent to a company in Malta, even though King, the Activision company behind the game, is managed from London.
"Our research has found that between 2013 and 2017, Activision Blizzard paid €5bn in royalties generated from games such as World of Warcraft and Call of Duty to companies based in Bermuda and Barbados. This shifting of profits using royalty payments to tax haven companies is the same scheme used by Google, which has been heavily criticised by MPs."
This latest round of scrutiny comes off the back of another TaxWatch investigation into the video games industry. According to the earlier report, Rockstar has not paid corporation tax in the UK for ten years – seeking tax benefits, despite making nearly $5 billion in profits. Rockstar has yet to respond to the claims.
We reached out to Activision Blizzard for comment, who directed us to the statements made in the Sunday Times article.