Taxing games

Remember when politicians were oblivious to the depths of gaming culture? Those days are long gone.

Last October, Congress began investigating virtual worlds to determine how the in-game earnings of those who play might be taxable. Although not always officially sanctioned by the developers, players have been converting in-game currencies and goods to real life wealth since the early days of Ultima Online, with Second Life real estate mogul Anshe Chung claiming last year to have earned more than $1 million through in-game business deals.

If you’re a digital miser swimming in a vault of gold coins though, fear not. “The Joint Economic Committee is not seeking to impose a new tax on virtual economies,” says Dan Miller, a senior economist with the Congress’ Joint Economic Committee. But the JEC is focused on making sure that current tax law is applied uniformly, and that means closing any loopholes that are being exploited. And, currently, that’s exactly what MMOGs represent.

The only question is, what is taxable and what isn’t? Speaking at the fourth State of Play symposium in New York, an annual meeting of lawyers and scholars to discuss the future of economics and law in virtual worlds, Miller was frank about the inevitable outcome of the committee’s report. “Given growth rates of 10 to 15 per cent a month, the question is when, not if, Congress and the IRS start paying attention to these issues.”

January 18, 2007


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