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Taxation of virtual goods in MMORPGS
deviliscious
Member UncommonPosts: 4,359
As many are aware, governments world wide have been discussing for quite some time the taxation of online game virtual assets.
Some say this is inevitable, but in what way could devlopers exempt their players from taxation on the value of their MMORPG accounts? Due to account sellers, even item binding and the removal of an in game economy would not exempt a game.
From what I have seen, the only way to effectively combat this would be to have developers themselves providing too much competition to the 3rd party RMT, thus running them out of their games by making it unprofitable for them to do so. Then the game developers pay the taxes along side the taxes they already pay, so their players would not have to do so.
Any other ideas on what to do about this?
For those who think this is not in our future, I suggest you research a bit more. China is already levying a tax on RMT, legislation in South Korea, Japan, Untied States and Europe is already being proposed. Govenrments world wide in economic crisis are considering this for a new source of revenue. CNET: IRS taxation of online game virtual assets inevitable
Comments
Reminds me of the marijuana tax stamp. Sure, they can send out forms and say, "Now, if you sell your character, your character's gold, gear, or leveling services (even though it's almost certainly against the rules you agreed to abide by when you signed up to play) you have to be a good little law abider and pay your taxes."
I doubt this will impact players who don't sell their virtual assets, as, having made no money from them, they won't be expected to pay a tax on them.
Now, if my pixels get taxed just because I happen to have gathered a lot of shiny ones, I'm going to laugh my ass off. Then add that to my list of reasons for getting the hell out of this wretched country.
I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals.
~Albert Einstein
http://steamcommunity.com/id/Cloudsol/
The accounts do have value if someone is wiling to pay real money for that account. It would be considered a " fair market value".
If there is someone willing to purchase something for real money, whatever that may be then has value. RMT has become a Billion dollar industry, and governments Now want their share.
Second Life is the game most often mentioned regarding taxation issues, but I've never played it so I can't comment on it.
I do have some comments however on the issue in general.
1. Purchases with RMT through the official company store would not be subject to income tax. If you pay $10 for an item worth $10 there is no profit, therefore no income. They could try and levy sales taxes, tho that would be such a bureaucratic nightmare that I could see some companies shutting down their item shops rather then deal with it.
2. As long as companies make it illegal to buy/sell items or accounts for real money, it souldn't be a problem either. You don't pay taxes on illegally gained money. If you make one million dollars selling drugs, no government is going to send you a tax bill. They simply confiscate all of it. If an account was hacked/stolen, it'll be returned to the rightful owner like any other stolen property. If it's the rightful owner selling it, then it would most likely be treated like any other confiscated items that can't legally be sold: drugs=destroyed, account=deleted.
One thing in this scenario could be that companies might actually have to pursue gold sellers/account sellers more vigorously so some government agency doesn't say they are giving tacit approval to the sales by not pursuing them.
The Moving Finger writes, and, having writ,
Moves on: nor all thy Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all thy Tears wash out a Word of it.
~Omar Khayyam
My understanding is that is got on the radar because some real-world corporations appear to have investigated using virtual currencies (eg Linden Dollars in Second Life or tokens used in some Chinese games) to hide real-life transactions and evade taxes in the same way they might try to use small Caribbean banks.
It's not that governments *want* to spoil the fun of games - it's that the real economy is intruding into them.
They would first have to make 3rd party RMt illegal to prosecute it, as is breaking a user agreement is not illegal, nor does it hold much weight in a court of law.
If it is stolen, that is another matter, but if they actually are training accounts and selling them or items , that may be taxable, even if it is against to user agreement.
I also think the best way to comabt 3rd party RMT is through developer competition, and the developer then could pay the taxes rather than placing it on the players.
Either way, I believe this is something devs are going to be forced to address in the very near future.
If someone buys a car for $20,000, there's a sales tax involved. If there's a 5% sales tax, he'll pay $21,000, the dealer will get $20,000, and the remaining $1000 will go to the state.
If someone buys $20,000 worth of WoW gold, there's currently no sales tax involved. You meet the car dealer's character online, transfer the WoW gold to his account, he converts the gold into $20,000 and signs over the title for the car. The dealership's general manager then writes off the car as a loss on his balance sheet.
So rather than ask the question of, "more taxes...unjust...BLAH," why don't we ask the question of, "why do those who transact in virtual currencies get to pay no tax, while those who transact in real currencies have to follow the tax law?"
The reason it's necessary to tax virtual goods and currency is because they are proxies for real value, just like any other currency or value-laden asset. And because of that fact, the virtual economy has been used to launder money , often times for goods and services that are criminal, like pornography, drugs, and aid to terrorists.
But in order to go after those crimes, you need to be able to show that a transaction took place. Right now, someone who sells crystal meth for WoW gold cannot be prosecuted for selling crystal meth (distribution or possession, maybe, but not sales), because such a transaction is not viewed by the law as a "sale."
But if you are going to say that transacting in WoW gold IS a sale, then, like all sales, it must be something that is taxable.
__________________________
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--Arcken
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Isn't income from rmt already taxed? In the UK all income is taxed, if you are talking about poeple not declaring the revenue tey may be obtaining from rmt, well that is already illegal.
-----
The person who is certain, and who claims divine warrant for his certainty, belongs now to the infancy of our species.
They have also been dicussing taxing it as property, just as you do a house, automobile or a boat. So even if you do not sell your in game items or account, it could still hold value.
They have been looking at the gaming market as anew luxury market for taxation.. First they want to tax mileage, now this!
Hmm, maybe I could pay my taxes then in wow gold :P
And is tax evasion in gaming really the problem when banks and other companies transfer billions to avoid paying taxes?
Taxation only applies at the point at which virtual goods are crystallized into real cash. Seems fair enough to me. If someone makes a career out of creating and selling WoW characters why should they not pay tax on their income the same as someone who works in office from 9 to 5?
This just comes back around to the issue of internet shops paying or charging a sales tax at all be it a VAT tax for the UK or a sales tax for the US. I don't see it being an issue for the average gamer and I can imagine the letter from Inland Revenue saying: Hello Mr. Snugglemuggles. It has come to our attention that you have failed to pay the proper VAT on your newly acquired Staff of Wham +7. Please be aware that our virtual collector will be in game and looking to collect.
Personally, I have an issue with governments wanting to tax a bit of everything.
No virtual taxation without virtual representation! Er, uh sorry..
Get rid of RMT, problem solved.
The moment you attach a real world value to virtual things, is the moment you attract attention to it from the tax collectors. If virtual goods stay virtual, they have no real world worth in the monetary sense. If you start selling virtual 'products' or 'services' for money, then they acquire actualized value, and fair game for taxation.
It's a large part of why so many developers try to ban as much RMT as possible. Not only from the taxation perspective, but from a legal perspective. If all of those ingame items and actions start carrying an actualized value with them, then it opens up the developer to a lot of liability. Server instability, lag, rollbacks, disconnects, etc, could start becomign grounds for suing the developer for lost or damaged "property". While yes the ToS is supposed to cover this, it's mostly only enforcable due to the fact that said virtual goods it's talking about are considered intangible and without real world value. The moment virtual goods are concretely recognized as assets with a tangible value, then it opens a whole new can of worms.
Heres the thing, every single virtual item in an mmo is property of the game dev, you never own a single thing when you play an mmo.
Thiose items arnt yours, and thats where the niot being able to sell them comes in, you cant sell something you dont own.
Apparently stating the truth in my sig is "trolling"
Sig typo fixed thanks to an observant stragen001.
Ideally yes, that would be the case. However, nothing legally is stopping people from selling those items though, they're still doing it, and not claiming the money they make off of that as income.
That's the catch 22 of the issue. If the government starts taxing sales of virtual goods by players, whether the game company says the player "owns" said virtual item or not, the taxation of the sale of said item implies a sense of ownership on the part of the player. With taxation comes some sense of property rights, that's the good and the bad of it.
Hence why so many developers are so rabidly against third party RMT, because it sets up a situation that could potentially create very bad precidents agaisnt the developers. It's also why the RMT that developers do sell, they carefully word it that they are only selling you a code, not an actual item. The code just so happens to unlock an item in the game itself, and the ingame item has no real world value, only the code does -- according to game developers anyways.
This is why I invested all my money into a sure thing, game cards for APB.
LOL!!!
Well, OP, I always thought that one of the the original ideas for paying with points in most games was to make that whole deal simpler. Not as big a reason as multinational needs, but still...
But that won't necessarily stop them from taxing the points themselves.
From a standpoint of what does/doesn't get taxed, I can see the point in finally taxing virtual goods, the way I descibed above. There are few things in life less necessary for survival than virtual items in an MMO.
You already pay tax on buying points/credits for in-game shops, it is only player-player trades where you get around this. So I have no problem with them introducing it, biggest losers are Second Life and Entropia.
The question is where does it stop will they tax you on the theoretical value of your character? Take WoW for instance how would they tax you would there be a set value based on your gear level that would translate to a real world value that you would have to pay tax on? So you got an offset of DPS gear because you and your guild run ICC weekly does that offset add more theoretical value to your account thus raising your taxes? Implementation is the key here and how they want to tax things. Will they tax you on auction house transactions? I'm sure f we let this go that they would get as greedy as humanly possible and destroy gaming. If you let it go they are going to force their way in look at any other government regulated or taxed item or transaction...what a mess.
@OP the Death of the F2P MMO age
Philosophy of MMO Game Design
Governments get their share, from the companies themselves. Not us. I will never pay taxes for just playing a game, except for the following sentence: In New York I get taxed on anything I buy or pay for, even my subscriptions to games get taxed already.
To be clean on these forums, they can suckle my left one if they think they're gonna get any more money out of me. Tax my income, car, house, land, whatever. You don't get to tax my pixels that earn me nothing but the fun I have playing when not working and giving you the rest of my money.
I believe the only fair way to do it is simple percentage earned from virtual sales. If you sell a virtual item, whatever it is, for real money, then you would pay a fixed percentage on that sale, probably handled the same way self-employed people do their taxes, but I really don't know enough about that.
It would only be relevant if you are buying/selling for real money, so I don't see it being a big issue, virtual to virtual transactions would have to exempt as the government can only tax you on real money.
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