Virtual Taxation Without Virtual Representation!

[brynndragon]

When I first heard about this I assumed it was a hoax, like the congress taxing e-mail thing. But I trust the Washington Post to do their homework: Congress ponders virtual taxation of virtual economies. As a side note, they've already got the interaction between real-world and virtual economies figured out - you treat the virtual economy aspect as good-or-service and thus only need to follow the real-world money.

As an aside, I keep wondering if I should do the Second Life thing. Part of me says, "One life should be enough for any person, if it isn't then you're doing something wrong." Another part of me says, "Dude, NPR played an interview with Kurt Vonnegut recorded live in a Second Life studio and Reuters is taking it seriously too. Maybe it's worth checking out." I'm still pondering it.

EDIT: I was trying to say that they already have a system in place to deal with real-world economic interactions of virtual economies (you treat the exchange of real money for virtual money/goods just like any other sale that involves bytes rather than physical goods - in other words you treat it just like a physical good being sold to someone ;P), so they don't need to figure that out. Although they might decide to treat that interaction in some other fashion (I hope not, taxes are complex enough as it is). As for me, all I want is something to stop people from mailing virtual spam about giving them real-world money for virtual goods/money to my virtual mailbox in World of Warcraft comma dammit.

Comments

[agnosticoracle.livejournal.com]

I don't know why they need to think so much about it. If they want to tax virtual they could do it the same way the tax gambling chips. When and if the virtual dollars are converted to US dollars tax the "winnings".

[benndragon.livejournal.com]

Like I attempted (but apparently failed) to explain, that's pretty much what they do now - any time real money is exchanged for virtual goods/money it's treated like a sale and taxed accordingly (after all, we've been exchanging money for bytes for quite some time now). I can see them deciding to treat it as something other than a sale for tax purposes, which would suck because it would increase the complexity of an already-overly-complex tax system.

taxing gambling chips

[admiralthrawn.livejournal.com]

If you ever open a store where you sell works of art, and request that your customers pay you in casino chips because that way they don't need to pay sales taxes (because "nothing of value has been exchanged due to the lack of real money involved") and then you go to your neighbor's store and buy something with those casino chips (or even just go to the casino and gamble with them)...

You will rapidly find that the government believes you have just set up an alternate system of currency, and wishes to tax you on it, because what currency you pay in has no bearing on your obligation to pay sales taxes, income taxes, etc.

For reference, this came up with frequent flier miles as well; they are a completely monetary way of compensating someone if they are freely transferrable (which they were on some airlines, briefly). The government pointed out to said airlines that bits on a computer saying "bob has X miles" looked an awful lot like bits on a computer saying "bob has X dollars", and that with the freely transferrable ones you could change dollars to miles (almost every airline lets you just buy them if you care to), and you could ebay them to get dollars back, so the airline was running a bank with all deposits in a foreign currency. This means that the airline was subject to all the banking regulations... And currency market regulations... And seizure of assets regulations should they ever change the rules under which you could redeem them...

This also came up with various people creating new currencies: you give them some cash, and they record that you own some "e-gold" or whatever; you then spend this e-gold in ways that look a lot like using a credit card; the merchants then cash it out in ways that look a lot like asking Visa to give them money for all of their transactions. Not surprisingly, the government has ruled that it really doesn't matter if your credit card company denominates your debts/credits in dollars, pesos, rubles, e-gold, "gold pieces", or linden-dollars -- if you're running a credit card company, you should be subject to all the regulations involved in running a credit card company.

[brewergnome.livejournal.com]

::cocks head::

Well, if it directly interacts with the RL economy... sure. Otherwise, HUH?

[damhan-alluidh.livejournal.com]

Sticky, since a lot of their customers aren't american citizens. (Ahem)

[benndragon.livejournal.com]

Yea, Americans are far from a majority in MMORPGs - last I checked there are more hardcore gamers[1] in Korea than here (and by "here" I mean "the entire North American continent"). I imagine "figuring out who is American" is entirely subsumed into "figuring out who owes us money, real or virtual", though.

[etherial.livejournal.com]

mmm...virtual tariffs...

[d-klein.livejournal.com]

I won't be surprised if in my lifetime a tax is placed on the friggin air I breathe.

[dirkcjelli.livejournal.com]

... because of course, the United States owns the internet...

[greyhame.livejournal.com]

Somewhat related, this interesting piece at J. Grim's Laboratorium.