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Are virtual economies taxable? September 13, 2006

Posted by Al in : bizarre,games,Internet , trackback

This question is growing in importance as more and more virtual worlds are springing up across the Internet. Although mainly MMRPG’s are the main virtual economies FPS’s are now allowing you to purchase additional equipment with real cash, and virtual realities like Second life have a thriving market economy both virtual and real. Given that some people’s jobs are now completely virtual, whether they are full time players or a poor Chinese student helping you mature your character for a pittance, then the income they generate should surely be taxable. But if the income is purely virtual then how can this be taxed? This article covers this issue very well, and also produces some interesting quotes:

If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner.

Which I find remarkable. It appears that in the eyes of the tax office breaking the law is secondary to paying your taxes – and I imagine that this may actually be true these days. I would be interested to see if anyone ever did report such an income, and if they did then would the IRS be obliged to report such information to the Police, or would there be some kind of client confidentiality clause? Would this depend on how much money you are paying them? Because if you were arrested and could no longer earn this taxable income by stealing then they would lose out on your taxes.


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