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Government The Almighty Buck Entertainment Games News

China To Begin Taxing Profits From Virtual Currencies 65

Posted by Soulskill from the everyone-wants-a-piece-of-blizzard's-pie dept.
The Wall Street Journal reports that the Chinese government will collect a 20% personal income tax on any profits obtained through the redistribution of virtual currency. The legislation is intended to curtail speculation in virtual markets, which can be quite profitable. Quoting: "The announcement, which was distributed to local tax bureaus, specifically takes aim at those who buy virtual currency from gamers and surfers and sell it to others at a mark-up. Taxation officials are granted the right to determine the original price of online virtual currency if the individual fails to provide proof of an original price, it says. The policy would cover China's legions of online gamers, who can use online virtual currency to buy better equipment and new powers for their online warriors. But it also affects millions of others who use virtual currencies on instant-messaging services and Web portals."
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China To Begin Taxing Profits From Virtual Currencies More

China To Begin Taxing Profits From Virtual Currencies

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  • Yay (Score:2, Funny)

    by Jbcarpen ( 883850 )
    So, will this mean fewer gold spammers? I suppose we shall see.

    • I can't believe i'm going to say this but... poor china is going to outsource to africa. Africa doesn't have the tax and people will work for EVEN LESS. Prices wont change.

      • Re: (Score:2)

        by vux984 ( 928602 )

        Africa doesn't have the tax and people will work for EVEN LESS. Prices wont change.

        Does africa generally have enough internet infrastructure?

    • Re: (Score:3, Insightful)

      by cgenman ( 325138 )

      Sadly, it doesn't seem that way. The WSJ article seems to be talking about currency speculation... I.E. buying gold from someone low and selling it high. Gold farming proper has no buy portion, and is merely grinding and harvesting from within the game.

      This does seem to indicate that the door is open to potential future taxes on gold farmers, as well as a potential shift of gold farming activity to korea, vietnam, or other countries in the region. But for now, this sounds like a tax on buy low / sell hig

    • Re: (Score:1, Funny)

      by hesaigo999ca ( 786966 )

      Hey I enjoy being able to finish a game faster then anyone else because I bought a trillion gold online. I spend lees on trying to get items that allow me to finish the game just the same in smaller amount of game play. I am sorry I am a WoW fanatic, but think blizzard is too greedy, please running from 1 end of the map to the other on each map...until u hit lvl40 then you get a horse, but then the maps get bigger etc... I am tired of running .....virtually

      • Re: (Score:2)

        by vux984 ( 928602 )

        but then the maps get bigger etc... I am tired of running ..

        Nobody is making you play. Why not quit and play something else that you actually enjoy more?

        • The sad truth is the fun comes from playing with others that you have become friends with or are in the same guild as... I even changed my character from one server to another to meet up with friends and play with them...(work friends). Guild wars is one of the few games like this that is free online..and does not hit your wallet should you take too long to level your character up.

          Trust me...if there was a free version of WoW I would be playing it instead of this one.
          I never understood how we all seem to ke

  • Call me dense but... (Score:2, Insightful)

    by mlts ( 1038732 ) *

    I'm assuming this means that when someone sells virtual currency for real life currency, they pay 20% of the real life currency earned to the Chinese government?

    If so, what will end up happening is that gold prices go up 25%, but the market essentially stays the same for the most part.

    • Re: (Score:1)

      by KDR_11k ( 778916 )

      If so, what will end up happening is that gold prices go up 25%, but the market essentially stays the same for the most part.

      If gold prices can go up while increasing profits, why haven't they done so already? The cstomers don't care about the tax burdens of the seller, they just care what price they get so if they can bear a 25% increase why not do it?

      • Re: (Score:2, Interesting)

        by Anonymous Coward

        Because someone would undercut them?

        What do I win?

        Seriously, the cost of the good (in game gold) is currently based on the difficulty of procuring it. Someone has to pay the farmers to sit around and do mindless repetitive tasks. After this, the cost of the good will be based on two things. Therefore the price goes up.

        • Re: (Score:3, Insightful)

          by Anonymous Coward

          Grandparent was pointing out that the Chinese cannot arbitrarily increase the price of farmed gold even by oligarchy. Chinese gold farms are competing internationally. Due to China's huge market share international prices may rise temporarily, but they'll come down fast and China will see its market share shrink as gold farming grows in places which previously could not undercut the Chinese price.

        • Re: (Score:1, Troll)

          by myowntrueself ( 607117 )

          Someone has to pay the farmers to sit around and do mindless repetitive tasks.

          Ever play World of Warcraft?

          Mindless, repetitive tasks is pretty much what people *pay* Blizzard for the priviledge of doing every day.

          If it isn't the 'dailies' its 'rep grinding' or 'mat farming' or, for that matter, 'raiding' or 'pvp' which are intensely repetitive and mind numbing when you get down to it.

    • Jeez, at least read the summary if you can't be bothered to read TFA

  • Seems problematic (Score:4, Interesting)

    by Dr. Hellno ( 1159307 ) on Wednesday November 05, 2008 @02:22AM (#25637451)
    I'm curious to see how precisely they define virtual currency. If they're using something like "property which has no physical manifestation, and is not legal tender, but which may be exchanged in certain markets for legal tender", then congratulations china, you just slapped a 20% tax on a whole range of derivatives and options traded in stock markets worldwide. Mind you, not entirely sure I disagree with doing that, in principle anyways.

    • I dunno, do you need to define virtual currencies at all? The way I see it, you can ignore it until you try to sell that virtual gold for RL money. (Or virtual items, same idea.) How's it different from any other RL sale for RL money? The guys selling any other stuff already paid VAT and income tax, so I fail to see why gold farmers wouldn't.

      And to get even farther away from the "but it's virtual" aspect, think of it as a service. You pay me X dollars, I do service Y for you. In this case the service is hel

      • Re: (Score:1, Troll)

        by Hognoxious ( 631665 )

        Everybody knows that taxes are bad and unconstitutional and against human rights and like totally unfair, man!

        So take your reason and logic elsewhere - they aren't welcome here.

      • We tax taxi companies, we tax airlines, we tax plumbers and mechanics, and we tax pizzerias. Probably the Chinese do too. Why wouldn't the same apply to someone whose service is related to a video game?

        I would have no problem with that. But since they're trying to apply a specific 20% tax to a specific class of transactions, it becomes necessary to clearly define those transactions. You're right though, it would make much more logical sense to tax this stuff like any other investment income.

    • You should disagree, high taxes are never good and are passed on in various ways. This one I'm not even sure yet makes sense - will gamers have to start paying tax on their hobbies? That would suck.

      Oh, and I'm hawking this:
      http://www.apttax.com/ [apttax.com]

      • will gamers have to start paying tax on their hobbies? That would suck.

        Gamers would only have to pay this tax if they converted their virtual currency into real money. If you just play the game then this wouldn't affect you. Basically all they are saying is that if you sell virtual currency they are going to charge 20% sales tax.

    • While I agree with your point in principle, I suspect that this is one of those situations where it is just understood(which is to say, people who don't think too clearly believe they understand) that big, serious, guys-in-suits-and-shiny-office-buildings stuff could not possibly be in the same category as pimply-gamer-nerd stuff. Sort of like how RICO was only ever supposed to apply to damn dirty gangsters, and people where shocked, shocked, when it began to be used against "legitimate" businesses with RIC

  • The announcement was made on Sep. 28th. It was only recently pushed to the Administration of Taxation's website.

  • From TFA: Many said itâ(TM)s unfair to tax on individuals while internet companies are exempt.

    I don't know how broadly they define "internet companies" but it sounds like the gold farmers aren't affected by this tax. They run sites to sell it, so are probably exempt.

  • Virtual currency should be taxed online. (Score:5, Funny)

    by Thanshin ( 1188877 ) on Wednesday November 05, 2008 @02:52AM (#25637581)

    I wonder what unique items would drop a chinese tax collector.

  • Virtual tax!
  • Hopefully this will slow the rate of gold farming, if the Chinese government is serious about enforcing this. But I don't see why they wouldn't. It's pure profit.
  • Some might think that this is yet another ridiculous taxation - imagine how government is going to use all the virtual tax they've collect: establish a virtual central bank? Exchange the virtual money in virtual exchange market like ebay?

    Actually they don't need to. Most forms of virutal money in China are having their real life exchange market.

    In the article you can find that cute QQ moscot representing qq.com, who issues Q-coins. This is one very good example. QQ-coins can be used in virtual exchange,

    • Re: (Score:2, Informative)

      by gzipped_tar ( 1151931 )

      I think you (or the WSJ journalist) are reading it wrong. The Gov. doesn't collect "virtual tax" of any kind. That simply doesn't make sense.

      The announcement made by the Chinese State Administration of Tax basically said this:

      1. If you buy virtual stuff in real money and resell the virtual goods at a higher price, then the price difference you collected shall be taxed.

      2. The tax law already has a section covering this kind of activities. According to the law, the tax rate should be 20%.

      3. If the reseller ca

      • Re: (Score:2)

        by jsse ( 254124 )
        I think you misread my first paragraph as my opinion. XD

        My only opinion is that this tax doesn't affect virutal trading that much, the rest are just fyi. ^^

        Thanks for the clarification anyway.

  • The article linked to says they make 145$ a month. How in the hell misleading is that. Profitable would be at least nearing minimum wage... Obviously we are talking about poor parts of china but its still misleading.

  • I mean, none of them are given by laws of nature. Mabye one backed by gold or similar would count as not virtual?

    • Your minds make it real.

      What is gold worth?

      A banana is worth more to a rat than a kilo of gold.

      You may think the rat is stupid, but you can't eat gold.

      So the only way you can get food for gold is if someone else _believes_ it's worth giving you food for it (or at least something else that can be eventually traded for food).

      I wonder how many bananas the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund can buy now. I'm sure it's a lot less than what people believed it could in 2007.

    • I mean, none of them are given by laws of nature. Mabye one backed by gold or similar would count as not virtual?

      Why would gold not be virtual as well?

      In the end its all just barter, and something is only worth what somebody is willing to exchange for it.

  • Not that I care about this that much, but really? The Chinese government is taxing gamers that sell game money?

    Granted, people are dumb enough to spend their hard earned money buying game gold.

    But taxing those who sell it? even more ludicrous.

    This is part of why I avoid MMO games like the plague. They're filled with stupid people who have no life. And before you say, "wait a minute, I have a life and I play", Nope, no you don't.

    I have said this before, all MMO games to date have been an endless cycle of

    • Re: (Score:2)

      by Grimwiz ( 28623 )

      OK Troll, I'll bite...

      Games only end to make you buy the next one. See Rogue/Moria/Angband/sudoku for an alternative.

      The point of playing is not to reach the end, but to enjoy playing.

      I do admit that enjoyment does seem to elude a lot of gamers, but that is their problem not the game.

  • I wonder if the Chinese tax collectors would accept virtual money. Or maybe Monopoly money?

  • Not news. Tax 101 (Score:3)

    by Madball ( 1319269 ) on Wednesday November 05, 2008 @12:26PM (#25645225)

    If I buy commodity X at $1 and resell it at $1.50 (or equivalent RMB) and I do it repeatedly, I'm a dealer of X. Tax agencies throughout the world will tax me the majority of the time on this profit. X can be anything--shoes, cars, houses, e-gold.

    So, Chinese government is making it clear that you have to prove a basis cost of $1, otherwise they will tax you on the full $1.50.

    This is normal, expected, and even reasonable (the righteousness of the concept of taxes aside).

  • fair (Score:3, Funny)

    by trb ( 8509 ) on Wednesday November 05, 2008 @01:29PM (#25646611)
    I think this would be fair if they took the tax revenue and plowed it back into their virtual infrastructure - paving virtual roads, building virtual bridges, paying virtual police and firefighters, and so forth.
  • Governments get to tax but that means they have an obligation to help provide the infrastructure. Is the government going to contribute anything to that virtual world?

  • That is that once 'money' remains virtual it is fine, but once it is Cashed Out into real currency then shouldn't it be taxed as would any other income? For example, if you sell an idea on Ebay for 10,000.00 and this money gets deposited in your bank account, shouldn't you declare this as income?

    Unless I am misunderstanding the intent of this law (it surely can't mean that if I sell a piece of armor to someone in WoW for 10Gold I need to pay 2USD in tax),I don't see why it is a big deal. Or how companies ma

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