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[ComputerMKII]

Source: http://www.bfmtv.com/economie/exclusif-profits-call-of-duty-partent-aux-bermudes-562440.html

Exclusive - how the profits of 'Call of Duty' leave to Bermuda

The world leader in video games Activision Blizzard -a Vivendi subsidiary- is very profitable. But it hardly pays any taxes outside the United States, and particularly in France, thanks to a tax optimization scheme.

When you buy the latest installment of Call of Duty and you pay your subscription to World of Warcraft, you probably think that your money goes to California, where Activision Blizzard - the publisher of these games- is based. Or even in France, where its owner Vivendi is based.

But it doesn't. In fact, all profits generated outside of North America go to Bermuda. Indeed, the global leader in video games has implemented a tax optimization scheme in this regard. Result: at the end of March, $ 2.7 billion of profits sleep in this tax haven in the Caribbean - 60% of the total cash flow of the company.

The advantage: they can pay virtually no tax. Thus, in 2012, Activision Blizzard paid only $ 38 million of taxes outside the United States - only 4.8% of its profits...

The result: while international market accounts for half of the editor's profits, it represents only 12% of the taxes paid...

Taxed nowhere

To achieve this, Activision Blizzard has created at least seven subsidiaries in Bermuda, and at least as many in Delaware - the internal tax haven in the United States. And until 2011, the publisher was still using another tax haven - Luxembourg.

In addition, they also use the flaws of European taxation. Thus, they created at least six Dutch subsidiaries using a very special status. These subsidiaries are registered in the Netherlands, but from a fiscal point of view, they are resident in Bermuda. This allows them not to pay tax on profits or the Netherlands or Bermuda... well, nowhere!

Profits only where there is no tax

In the end, this complex scheme follows a simple logic. Where there is no tax, subsidiaries are very profitable. But where a tax is levied, subsidiaries make very little profit - surely a coincidence ...

Thus, all profits outside North America go back to a subsidiary called ATVI CV, registered in the Netherlands, but tax resident in Bermuda, and therefore pay zero tax on its big profits. In 2011, this subsidiary (which has no employees) achieved a pre-tax margin of 46% on a turnover of 660 million euros.

Deliberately impaired profitability

But before arriving in Bermuda, profits go through another subsidiary -Activision Blizzard Coöperatie AU installed near the Amsterdam airport, which itself pays its taxes in the Netherlands, at the legal rate of 25% of its profits.

Alas! This subsidiary is very little profitable: in 2011, it performed a pre-tax margin of just 1% on a turnover of € 953 million. Result: the taxes paid to the Dutch tax authorities are ridiculous: € 2.4 million in 2011.

How do we arrive at such poor benefits? It's simple: for the benefits to be the smallest possible, profitability is deliberately impaired. In particular, Activision Blizzard Coöperatie UA pays - on every video game sold - very significant royalties on patents used by ATVI CV, a subsidiary which is a tax resident in Bermuda. These royalties accounted for 69% of the turnover in 2011, and even 84% in 2010.

Used here is another flaw of the Dutch tax system, which does not tax royalties paid outside the Netherlands - unlike in France, for example. This is the same flaw that is used by Google in its tax evasion scheme.

Hardly any tax paid in France

The same principle applies in France, where the video game publisher has two subsidiaries: Activision Blizzard France SAS and Blizzard Entertainment France SAS. The first hardly pays any tax: 64,609 euros in 2011. The second performs even better: not only does it pays no tax but on the tax authorities owe him money (see below).

Explanation: These two subsidiaries are, again, very inefficient. In 2011, they made a pre-tax margin of only 4% on a total turnover of 363 million euros. In addition, Activision Blizzard France SAS has made losses in the past, allowing it to reduce its current tax.

If the French subsidiaries were as profitable as the whole group, then they would gain much more profit (28% margin before tax in 2011), and therefore pay more tax (35 million euros in 2011).

To make matters worse, the behavior of these two subsidiaries does not seem exemplary. Since the merger between Activision and Blizzard, their staff was reduced by half (in particular via a redundancy plan, cutting 200 jobs), with 557 employees remaining. Activision Blizzard France SAS has also recently undergone tax audits and URSSAF, both of which ended in tax adjustments.

When asked, neither the Activision Blizzard HQ, nor the French subsidiary nor Vivendi have answered us.

Key figures

Income tax

Activision Blizzard France SAS
2011: € -64,609
2010: € -80,773
2009: 0
2008: € +83,384
2007: € +1,574

Blizzard Entertainment SAS
2012: € +3.3 million
2011: € +2.3 million
2010: € +2.9 million

Coöperatie Activision Blizzard UA
2011: € -2.4 million
2010: € -1.2 million
2009: € -2.6 million

ATVI CV
2011: 0
2010: 0
2009: 0

Activision Blizzard Inc (outside North America)
2012: $ -38 million
2011: $ -47 million
2010: $ +16 million
2009: $ -2 million

Source: company accounts
NB: the + symbol indicates that this is a tax credit vis-à-vis the tax authorities

What to remember

Shareholding subsidiaries of Activision Blizzard

Activision Blizzard France SAS
Headquarters: Levallois Perret (France)
Shareholder: Coöperatie Activision Blizzard UA (100%)

Blizzard Entertainment SAS
Headquarters: Versailles (France)
Shareholder: Coöperatie Activision Blizzard UA (100%)

Coöperatie Activision Blizzard UA
Headquarters: Netherlands
Shareholders: ATVI CV (99%) and Activision Blizzard Bermuda Ltd. (1%)

Activision Blizzard Bermuda Ltd.
Headquarters: Bermuda
Shareholder: ATVI CV (100%)

ATVI CV
Headquarters: Netherlands, tax resident in Bermuda
Shareholders: Partners CV AB (99%) and ATVI LLC (1%)
General partner (general partner): ATVI LLC (registered in Delaware)
AB Partners CV
Headquarters: Netherlands, tax resident in Bermuda
General partner: ABIE Holdings LLC (registered in Delaware)

Sources: company accounts, Bermuda Sun

 

[maplelord93]

Computer
Down with capitalism

 

[dragonelite]

Normal procedures from big company.
There was an awesome documentary on youtube about.

 

[V_Arnold]

Normal procedures from big company.
There was an awesome documentary on youtube about.

Yeah, this one, it is a must watch for anyone who believes that it is not a damaging pratice:
http://www.youtube.com/watch?v=d4o13isDdfY

Damn it, why did Blizzard have to be paired with this..abomination?

 

[rdrr gnr]

Every major company does this. iirc, EA has some well-respected lawyer doing their own respective tax nonsense. Can't seem to find that article, however.

 

[zakislam]

Every large technology company goes to Bermuda. Google's Bermuda subsidiary has literally 1 employee registered - it receives tens of billions.

 

[Valnen]

Damn it, why did Blizzard have to be paired with this..abomination?

Because Blizzard's shitty parent company wanted to own Activision too. Was a pretty smart investment, they've probably made back the money they spent and more.

 

[zomgbbqftw]

It's up to the governments of developed nations to fix tax legislation.

 

[SiegfriedFM]

This shit should be illegal.

 

[Valnen]

It's up to the governments of developed nations to fix tax legislation.

Definitely. Just sending your money elsewhere shouldn't be an option. You make money, you should have to pay taxes on it like everyone below you. The world will be so much better off when this gets fixed. Or...if it does, rather. Corporations would do ANYTHING to stop it. Probably some pretty nasty things at that.

 

[Fabrik]

Fuck this shit. We really need to wake-up.
Madoff, Kotick, Lehman Brothers, Goldman Sachs, what the hell is wrong with them?

 

[V_Arnold]

Because Blizzard's shitty parent company wanted to own Activision too. Was a pretty smart investment, they've probably made back the money they spent and more.

Only one thing left to do. Back to the Future: Video Games Edition, convince Blizzard to stay private

 

[Catshade]

Didn't Valve open an European office in Luxembourg recently? I guess they have to stash those post-Summer sale moneys somewhere...

 

[Cels]

Fuck this shit. We really need to wake-up.
Madoff, Kotick, Lehman Brothers, Goldman Sachs, what the hell is wrong with them?

lol are you comparing a man who ran a ponzi scheme to people who openly use legal tax loopholes that every single big corporation uses?

 

[Fabrik]

lol are you comparing a man who ran a ponzi scheme to people who openly use legal tax loopholes that every single big corporation uses?

Yes. Both should be illegal. I know it's tempting to use loopholes but it's immoral. Don't they have any principles? Are they that much money hungry?

 

[Cels]

Yes. Both should be illegal. I know it's tempting to use loopholes but it's immoral. Don't they have any principles? Are they that much money hungry?

it's systemic. if bobby kotick tried to end this practice, he would be voted out by the board in an emergency meeting immediately, and his successor would continue using the loopholes, because it's the smart thing to do. as other people have said, it would take multiple countries working together to remove these loopholes for anything to be happen.

what's truly immoral is the legislators creating these laws in the first place.

 

[Valnen]

Yes. Both should be illegal. I know it's tempting to use loopholes but it's immoral. Don't they have any principles? Are they that much money hungry?

(Most) corporations have no morals whatsoever. They don't even care about laws let alone ethics, if it will somehow make them money and if they know they can get away with it, they'll do it. It doesn't matter what it is or how much it fucks up the world. They'd probably kill to keep things the way they are...literally.

 

[MrTroubleMaker]

Disgusting.

This shit should be illegal.

It should be.

 

[Yasae]

Completely unsurprising but still one of the defining tenets of greed-based capitalism (greed is always implied).

 

[Fabrik]

it's systemic. if bobby kotick tried to end this practice, he would be voted out by the board in an emergency meeting immediately, and his successor would continue using the loopholes, because it's the smart thing to do. as other people have said, it would take multiple countries working together to remove these loopholes for anything to be happen.

what's truly immoral is the legislators creating these laws in the first place.

(Most) corporations have no morals whatsoever. They don't even care about laws let alone ethics, if it will somehow make them money and if they know they can get away with it, they'll do it. It doesn't matter what it is or how much it fucks up the world. They'd probably kill to keep things the way they are...literally.

I agree and I think a revolution is in order. Profits and growth at all cost is always to the detriment of something (Nature, Third world countries, etc...). We can't go on like this.

 

[-PXG-]

This should be illegal. This is tax evasion. Fuck these loop holes. I effectively pay more in taxes than they do :/

 

[nubbe]

Vote for socialists then

The current system is what you elected

 

[Freshmaker]

Normal procedures from big company.
There was an awesome documentary on youtube about.

Time to plug those holes.

 

[Pie and Beans]

Just makes me laugh whenever anything else is top agenda on any shitheel governments agenda to save money/raise normal people taxes when this twattery is going on.

 

[Valnen]

Vote for socialists then

The current system is what you elected

I do vote for more socialist politicians. They don't get elected. And even if they did, chances are they're in the pocket of a corp. Now what?

There is nothing a normal citizen can do to fix this, at least not with voting. And I don't think violence is the answer either.

 

[k_trout]

not sure how this is immoral

 

[Valnen]

not sure how this is immoral

Joking right? They're not paying their fair share of taxes.

 

[grandjedi6]

Meanwhile we can't even pass legislation to fund food stamps for the poor. AMERICA!

 

[2+2=5]

Sorry for the dumb question but wouldn't be more "legal" and simple for company who doesn't want to pay taxes to just transfer to a fiscal paradise?

 

[Fabrik]

Vote for socialists then

The current system is what you elected

Elections don't mean shit anymore. Right or Left, it's mostly the same (at least in France).
They all obey to the rich minority. It's the masses who are going to pay again.

 

[Stop It]

lol are you comparing a man who ran a ponzi scheme to people who openly use legal tax loopholes that every single big corporation uses?

Well when you only read sensationalist headlines and not delve any deeper then all companies are evil or something.

Guess what, companies hate tax and here's a shocker for you, neither do you most likely. Any time anyone in the UK uses an ISA, you're avoiding tax and I'm sure there's similar mechanisms available in the US. I personally voted for a party that pledged to raise the earning threshold for tax for a very selfish reason, to lower my tax bill.

The problem is that tax rules have allowed for aggressive tax avoiding using these tricks. I can't blame companies for using them really and as an individual I would take any legal measures open to me to reduce my tax bill if I could.

I don't buy the moral argument either as these companies would just extract more money from their customers to restore their return on equity that would be affected with a higher tax bill. If paying higher taxes meant higher prices the consumer backlash would soon shift that argument away from where it is now.

 

[Krilekk]

Yeah, this one, it is a must watch for anyone who believes that it is not a damaging pratice:
http://www.youtube.com/watch?v=d4o13isDdfY

Damn it, why did Blizzard have to be paired with this..abomination?

The abomination is Vivendi, who was with Blizzard in the first place.

 

[rdrr gnr]

Vote for socialists then

The current system is what you elected

Not really.

 

[Culex]

Every company does this. My company has their charter in Delaware, even though they have ZERO business in the state, to get a better tax benefit. It's not illegal, but it is twisting the tax law to your own benefit.

 

[kartu]

The funny thing here is that it is about money that governments aren't collecting.
And as far as I remember, governments do care about money.
Yet nothing seems to be done to stop it.

So either nice lobbying stops it, or it simply isn't easy to fix.

PS
Let's ignore Bermudas, tell me where should Activision Blizzard pay the income tax? Which part should go to Vivendi/France?

 

[Fabrik]

I don't buy the moral argument either as these companies would just extract more money from their customers to restore their return on equity that would be affected with a higher tax bill. If paying higher taxes meant higher prices the consumer backlash would soon shift that argument away from where it is now.

I don't buy it. If companies increased their prices, they would sell less. What they'll likely do to compensate is make more people redundant. Which is also bad.
The problem is: why do they always want more and more? Why can't they just stay stable after they reached a certain point? Why do you need to "fraud" to earn more millions when you already have billions? As an individual, I would be happy to pay less taxes, but after a certain income I consider sufficient, I wouldn't mind paying the rest in taxes. Once you can afford a car, a house, raise your children, have a few hobbies and holidays, all the rest is superfluous. You never need to earn more than 1 million $ per year to be happy. I know part of the benefits are going to new investments, potentially allowing to create new jobs but nowadays, I feel there's just piles of money sitting in the hands of a few not being properly used for the good of mankind.

 

[BlackLagoon]

So it's "tax optimization" now, not tax avoidance?

I do vote for more socialist politicians. They don't get elected. And even if they did, chances are they're in the pocket of a corp. Now what?

The financial crisis has actually prodded a bunch of European countries to try to address this. When they're facing a furious electorate and need to increase revenues, picking on corporations that are just leeching resources out of their country is actually a tempting option. It's not a quick or easy process though.

 

[No_Style]

Don't hate the player, hate the game? When I read stuff like this, all I can think is: "Good for you guys. You hired knowledgeable people to gain the advantage and play within the rules."

I feel they would be foolish not to do stuff like this. It's like not taking advantage of tax breaks as an individual.

 

[ComputerMKII]

So it's "tax optimization" now, not tax avoidance?

The first term is more neutral (it focuses on 'how' rather than 'why').

 

[D4Danger]

Don't hate the player, hate the game? When I read stuff like this, all I can think is: "Good for you guys. You hired knowledgeable people to gain the advantage and play within the rules."

Really? because I think "You're a bunch or amoral, greedy cunts who benefit from everyone elses contributions without paying your fair share"

 

[Acorn]

Success we have taken without giving anything back! Capitalism ahoy!

 

[BlackLagoon]

The first term is more neutral (it focuses on 'how' rather than 'why').

Yes, it's an attempt at whitewashing a bad practice, distancing it from its ethical implications. Like torture becoming "enhanced interrogation".

 

[OminoMichelin]

Unsurprising, every major (and even medium sized <500 employees) company do this. It's a disgrace for multiple reason, one of which is the incentive to hoard money for no reason.

 

[Fabrik]

Don't hate the player, hate the game? When I read stuff like this, all I can think is: "Good for you guys. You hired knowledgeable people to gain the advantage and play within the rules."

I feel they would be foolish not to do stuff like this. It's like not taking advantage of tax breaks as an individual.

Symptoms of a selfish society. Take everything I can while I can.

 

[george01]

as other people have said, it would take multiple countries working together to remove these loopholes for anything to be happen.

 

[k_trout]

Joking right? They're not paying their fair share of taxes.

no jokes

morality and taxes?? nope i still dont get it, i really dont

 

[OminoMichelin]

no jokes

morality and taxes?? nope i still dont get it, i really dont

you know the roads in your city, and the electric wiring, and the water pipes, and the garbage disposal? where do you think they come from?
edit: Not to mention police forces and firefighters. And hospitals, depending on where you live.

 

[k_trout]

you know the roads in your city, and the electric wiring, and the water pipes, and the garbage disposal? where do you think they come from?
edit: Not to mention police forces and firefighters. And hospitals, depending on where you live.

ye i get that
but please define morality for me as well

 

[Ace 8095]

you know the roads in your city, and the electric wiring, and the water pipes, and the garbage disposal? where do you think they come from?
edit: Not to mention police forces and firefighters. And hospitals, depending on where you live.

So you're telling me my taxes are used to buy good and services for the populace? I thought the government just hoarded it all. Thanks for this amazing insight.

 

[captmorgan]

Why doesn`t France just raise the tax at the point of sale?

To be fair I would light kittens on fire if it got me a lower tax rate.