In late November of this year, news releases began circulating, announcing the first virtual world millionaire. Anshe Chung, an avatar in Second Life, crossed into the seven-digit range with her virtual land development business. With an initial investment of $10, the cost to purchase a parcel of land in Second Life. And in just two and a half years.
And of course, this is on the heels of the announcement, in mid-October, from the Joint Economics Committee here in the United States, basically saying, “Huh. People really are making money in these virtual worlds, hmm? We should check that out.”
And they probably should. Companies such as IGE have been making money, against developer user agreements, hand over fist, for years. People are spending and making money in these worlds, completely under the radar of taxing bodies, rather than, say, going out to a concert, or going to a movie, or even, buying a new videogame to play. They’re too busy in the virtual world to spend on other forms of entertainment. We didn’t really think that was gonna fly, did we?
The other side of the argument is that these are fantasy worlds, and should be treated as such. Taxing would destroy the worlds. Why? Because there are millions, if not billions, of dollars worth of virtual goods exchanging hands.
Just think of the WoW Auction House. The IRS tends to view like-for-like exchanges as taxable – which means they see millions, if not billions, of dollars worth of taxable transactions within the scope of the game because real money trade gives these items real world value. And they’ll argue these worlds stopped being just fantasy the day someone made a real world buck from something in-game who was not employed by the developer or publisher of that game. But if giving my holy sword to my guild mate is taxable, virtual worlds are going to be in trouble!
This is not a black and white issue. Any legislation drawn up related to virtual worlds and income should be heavily researched, studied and explored before it is put into place. Virtual worlds are a fascinating, and potentially, highly useful medium, and knee-jerk or overly harsh legislation could kill them before they’ve had the chance to really demonstrate their full reach.
If the government had decided to tax and regulate the internet before it really took off and became home to many businesses and outlets, would the internet be as vast and varied as it is today? Probably not. So, perhaps, if we can trust our elected officials to use good judgment in these matters, we can preempt a net neutrality-like debate and get the correct structures in place before millions are relying on virtual worlds for their livelihoods. Here’s hoping.