New Tax On Games?

The surprise for SPOnG is that cash earned via virtual worlds is not already taxable. By this we don’t mean, for example, the 'Linden dollars' made in the over-hyped, technologically-disappointing, 3D chatroom called ‘Get A Life’ (Surely, ‘Second Life’? Virtual Ed.), but the dosh generated by exchanging real cash for this kind of virtual loot.

There are already sweatshops where workers spend their days enabling other, wealthier, players to increase their in-game value. As The New York Times reported:

“The people working at this clandestine locale (a Chinese sweatshop) are ‘gold farmers.’ Every day, in 12-hour shifts, they ‘play’ computer games by killing onscreen monsters and winning battles, harvesting artificial gold coins and other virtual goods as rewards that, as it turns out, can be transformed into real cash.”

Obviously not the fault of the games themselves, nor the majority of people who play and enjoy them. 'Grey economies' will always spring up in orbit around the main event - think ticket touts. However, it's the recent rise of non-gaming virtual environments - those based entirely on making cash to look flash - that have brought the potential for tax revenues into the dusty corridors of power.

Reuters, which has bought into the hype surrounding Second Life by placing a ‘correspondent’ into it (the world, not the hype… actually, they’re one and the same), reports a spokesperson for the UK Treasury saying:

“Our reaction to this at the moment is it’s something that’s very interesting and we are considering it. Where we stand at the moment is it’s not something that’s having a significant revenue effect. We don’t see a possibility of people being able to exist solely on money within Second Life. They’d have to withdraw the money and when that happens they’d be expected to pay a normal tax bill.”

The Australian tax authorities have a very different view however, with the Fairfax press reporting the following from the Australian Tax Office (ATO), “The real world value of a transaction may form part of your taxable income, even if it is in Linden dollars. In addition, there may be GST (Aussie, VAT) to consider. If you are getting a monetary benefit then it's not treated any differently - normal rules apply. Your income will not be treated any differently than if you earned it working nine to five in an office."

The North American tax authorities have also stepped into the potentially lucrative fray, with the Joint Economic Committee issuing a release stating that as of last month it has, “…begun an examination of the public policy issues related to virtual economies. A virtual economy is defined as the universe of transactions that occur within an online community, such as Second Life or World of Warcraft. These transactions include the sale of goods and services and take place entirely within virtual economies; there is no real-world or physical exchange.”

As ever the the powers-that-be, bless ‘em, have not only taken an age to understand what is going on technologically, but are now taking equally as long to emerge from their befuddlement. Prepare yourselves for a slew of announcement which, for the most part, will result in loopholes so enormous that you could get a Roadmaster through them.