Taxes, Second Life and Warcraft 441
An anonymous reader wrote in to say that there is "...a new law review article that explores the tax treatment of players in Second Life and World of Warcraft. The bottom line is that commercial activity that occurs in virtual worlds should be taxed the same as in the real world. But purely personal activity within virtual worlds should not be taxed."
Re:Only one answer (Score:4, Interesting)
Whose tax laws apply? (Score:4, Interesting)
OK, so thats a bit of an improbable example.
Try this on: In Canada, I can buy computer hardware from Alberta - which has no provincial sales tax - and have it shipped free to my house in Ontario - which has some of the highest provincial sales tax in the country - and pay (*drum roll please*) zero provincial sales tax. Thats not improbable; it's real. I built my last computer using components I purchased in this way. I'm sure lots of people in lots of countries do this. This is because governments cannot rightly decide where the tax needs to be applied, and frankly, the federal government cannot force any province to implement a sales tax to solve the problem.
So whose tax laws apply, and how do we enforce them?
This article might work in theory, but rarely do authors like this think about real world application.
Sadly, they often end up in government.
Re:Only one answer (Score:5, Interesting)
Oh, I basically agree, but this opens up a new can of worms: it commits you to:
a) separating businesses based on how much government they use, and taxing them differently (at least to a coarse approximation)
b) taxing the economy *only* at the rate required for the government provice the services needed for it to exist.
a) isn't so bitter a pill to swallow, but b) means much, much lower taxes, since very little tax revenue is spend on ensuring the necessities for the modern economy to exist, at least when honestly appraised. For virtually every government program, you can find a country that does without it, or has much less of it. (I can't sell items on ebay unless the government has a presence in Iraq? Come on!)
Re:Only one answer (Score:5, Interesting)
Secondlife however has a money market and maintains an up-to-date exchange rate of Lindon Dollars to US Dollars. It would be entirely possible to tax earnings in Secondlife in real dollars, although 99% of the time the tax would come out to pennies per month (effectively not worth the government's time), some of the larger Land Barons however could easily make enough to have to pay taxes on it.
Hack account == tax loss (Score:3, Interesting)
Then my account gets hacked. All my stuff destroyed and definitly converted to real world market value.
Does this mean I get to declare a loss for tax purposes?
Also this means that online time is creating value.
This would mean your payments to play are deductable.
Re:Only one answer (Score:5, Interesting)
Where transactions are purely virtual - i.e., the transaction does not touch real money - the transaction has zero value in the real world, and the taxes should also be zero. But if you're talking about RMT, whether it's sanctioned by the game developer (Second Life) or not (most MMOGs), then the transaction is no longer purely virtual.
This isn't exactly what the article author indicates - she believes that if you are dealing in Lindens, then you're essentially engaging in barter with intangible property - but I would argue that Lindens are worthless until there is an interface with a non-virtual good, service, or money, and that's the point at which tax could be assessed.
Whether or not from a public policy perspective it's a good idea or not to tax online transactions is another question entirely (e.g., tax moratoria, etc.).
Re:That pretty much nails it on the head. (Score:5, Interesting)
Re:Only one answer (Score:5, Interesting)
If people actually realized what the government spent money on, it would be a little easier to have them put a stop to frivolous spending and costly wars. Not to mention selling a war with a cost of $1,000 tops with cashbacks (oil sales) of most of that and then an annual cost upwards of 2000 dollars would've had the average voter thinking whether it was worth it or not versus sending others kids out to die.
http://www.house.gov/schakowsky/iraqquotes_web.ht
http://www.washingtonpost.com/wp-srv/politics/int
Re:Only one answer (Score:3, Interesting)
What are "disco fries"?
Re:Only one answer (Score:4, Interesting)
Well, yes, but I was referring to an honest appraisal of the necessity of specific government programs to specific economic activities. People typically put up the false dichotomy of "you don't like being taxed at 95%" (the marginal rate in some times and places)? Well gee, I guess you think we should disband the police!" My point was just, that this justification of taxation is flimsy: the tax doesn't need to be that high, and the transaction doesn't require each and every government program that exists. Please folks, just admit that you're using a taxpayer for another purpose, even if it is ultimately justified!
Re:Only one answer (Score:3, Interesting)
Re:Only one answer (Score:4, Interesting)
Many of us do NOT believe in the all powerful Nanny state. We believe that we can do many things, like provide for our own retirement, health concerns more efficiently if we keep more of our own money, and invest and save it towards such things.
This works rather nicely if you assume everyone earns enough money to provide for their own retirement and healthcare; this simply isn't true. Taking a look at America, the self-styled champion of this Conservative ideology, 10.5 percent of elderly people are living below the poverty line - and this percentage tends to be made up of minorites; 8% of those over 65 are black, but 24% of the elderly poor are. Right now in America, working for your entire life - up to 65 - at 45% of the average wage will still put you below the poverty line after you retire; this hardly seems fair, should the Government really not intervene?
It works even better if you assume that privatisation is more efficient; this isn't true either. Take healthcare, for example; if private companies are "more efficient" than government schemes, why is it that the USA spends more on healthcare per capita than any other developed country (OECD, 1998) without, according to the NBER, an improvement in survival or recovery rates? Surely this is an indication that a centralised system of healthcare is less wasteful than one in which everyone pays for the cover they want - if they can afford it.
Why draw the line there? Surely if you could be allowed to choose the level of law enforcement you needed, and pay for it, you could do a better job than the Government? After all, the problems in this area are similiar to those in healthcare: those who need it most are often poor and those who need it often don't anticipate the need. And as America has shown us, a profit driven atmosphere will lead only to improvements in efficiency, not in sacrificing peoples needs for profit. I'm sure there's a justification for costs to go up by three times the increase in wages, while simultaneously hospitals across the country shrink the profit-haemorrhaging Emergency Department that doesn't involve the word "greed".