Stories keep cropping up lately about whether or not the government will start somehow taxing “virtual economies” such as those found in Second Life or World of Warcraft.
I think the media is making up a story where there is none, presumably as an excuse to throw around words like “cyberspace” - to impress that segment of the population who still finds such concepts incredibly sexy. To me, this is a completely cut and dried issue, with an obvious answer.
First off, what happens in an imaginary world is just that - imaginary. You’re not taxed on fictional income made playing Monopoly, so being taxed for making imaginary money in World of Warcraft is simply ludicrous.
But what about when real money is exchanged for virtual money? What then? Surely this is an incredibly complicated transaction which bends all rules of economics and tax laws, if not those of space-time itself!
Nonsense.
The person selling virtual goods for real money is a contractor. They have performed a task, for which you are willing to pay money. The seller should get taxed on the income they received, just like any other independent contractor. Period. End of story.
But, you say, they’re paying for “virtual goods”, surely this is a brave new world of completely uncharted territory!
Again, this is utter nonsense. What is a website but a “virtual good”? If I’m paid to design a web site, in the end, my “labor” has merely rearranged electrons on a hard drive somewhere. This is exactly the same service performed by a “loot farmer”.
Now you say, “But a web site has real world value - you can use it to make money!”
Well, not necessarily, but nonetheless, people frequently pay for services which create no “value” in the economic sense. If I hire someone to paint a mural on my wall, have they created “value”? If I pay someone to cut my hair, have they created value? In both of these cases (and in countless others), a person is being paid for performing a service with no intrisic value. They’re simply performing a service that I find worthwhile, even though it generates no obvious real world financial benefit to me.
The only truly unique wrinkle I can find in the world of the “virtual economy” is the incredibly specific case of the virtual worlds’ software developers who can, conceivably, instantly generate in-game resources, and then sell them for real world cash. This would truly be a case of unfair real-world wealth generation. But the game developers don’t do that - to do so would be to devalue the in-game currency (just like in the real world) and make the game less challenging and interesting to players - resulting in fewer players and less bread-and-butter income.
This type of cheat would only be of value to a rogue programmer within a company, not acting for the benefit of the company as a whole, who would presumably face termination for this type of activity. This extremely specific situation hardly makes for a brave new world. Otherwise, if you’re loot farming, or otherwise getting paid to perform a task in a game (just as if you were paid to perform a task using Excel or Powerpoint), you are quite simply an independent contractor, and should be taxed as such. End of story.
Filed under Internet Culture
