Taxation Of Virtual Games 'Inevitable'

Dan Miller, a senior economist with the Congress' Joint Economic Committee, says that taxation of income provided from virtual worlds such as Second Life and World of Warcraft is on the way.

"Given growth rates of 10 to 15 percent a month, the question is when, not if, Congress and IRS start paying attention to these issues," said Miller at a panel discussing legal, social and economic issues in virtual worlds. "So it is incumbent on us to set the terms and the debate so we have a shaped tax policy toward virtual worlds and virtual economies in a favorable way."

The real money players earn selling virtual content is growing rapidly, with Second Life players earning millions in assets and cash. Miller claims that congress is not out to gouge virtual entrepreneurs, but they do want a piece of the pie.

"The Joint Economic Committee is not seeking to impose a new tax on virtual economies," Miller said. "We have a very clear record of supporting lower taxes in free market."

In order for congress to tax anything, tax liability would need to be determined. In other words, it would be necessary to figure out how much profit is derived from a transaction. Just how much is raiding that dungeon five times a week worth?

Miller and the Joint Economic Committee will be producing a report early next year that will address taxes, cybercrime, education and how these virtual worlds may be used in the future. Ultimately, the report needs to identify what a "taxable event" in a virtual world is.

Closing out the panel, Miller warned that, "Congressional and IRS interest in this issue is simply a matter of time."

Source: C|Net