Slashdot Mirror
IRS Eyeballing Virtual World Tax Policies
Kotaku points out a Washington Post report about this year's recommendations from the national taxpayer advocate (an official who suggests improvements and updates to the tax code) which include developing clearer protocols for reporting taxable income from virtual worlds. We've previously discussed the implementation of such policies in China. Quoting the report summary (PDF): "By one estimate, about $1 billion in real dollars changed hands in computer-based environments called 'virtual worlds' in 2005. ... IRS employees have been unable to respond to taxpayer inquiries about how to report transactions associated with them. Economic activities in virtual worlds may present an emerging area of tax noncompliance, in part because the IRS has not provided guidance about whether and how taxpayers should report such activities. To improve voluntary tax compliance, the National Taxpayer Advocate recommends that the IRS issue guidance addressing how taxpayers should report economic activities in virtual worlds."
To apply tax to things when they earn real income. For example, if you sell 3000 in WOW gold on ebay for US$500 (to make up an example since I don't know real values), you have to pay tax on the US$500 just like any other income. In that case you would not pay any tax at all on the ingame stuff.
The only issue comes up with currencies like the Linden Dollar that can be converted back and forth with US$ and other currencies, for those you could treat it like any other currency (presumably if I give you 500 euros as payment for something, thats still income and has to be reported as such, the same could apply to L$)
Why do tax stories always bring out the extremists?
Not everybody draws a clean salary. What is your income rate if you are buying and selling virtual goods? Heck, what is your income rate if you're buying and selling real goods? Or if you buy a good and the value goes up, but you haven't sold it yet? What if you're trading goods with value for other goods with value, and it never passes through a cash phase? What if a portion of your salary is drawn against goods that you have on loan to others?
A flat income tax isn't the answer. Forgetting about how it would shift the tax burden to those least able to pay, it would still be a nightmare of bureaucracy anyway. It would just be a different bureaucracy.
Considering the 2008 US federal recipts was in the range of 2.5 Trillion dollars, a cost of 500 million spent dealing with th emoney would be actually only .00002 of the total. That's less than one fiftieth of one percent. That's a monetary transaction cost that any business would love to have, and is a hundred times better than the 2% or so of every transaction that Visa skims off the top.
The ______ Agenda
Feh indeed. Both "flat" sales and income taxes are scams.
Come back and let's talk when:
your "flat" income tax covers all the money a person has coming in, whether it's wages, tips, dividends, interest, capital gains, inheritances, rents, gifts of more than nominal value, bonuses, options, frequent flyer miles, use of company vehicles; or
your "flat" sales tax covers everything of value that is sold, whether goods, services (including those of advertising agencies, lawyers, architects, accountants, and hookers), real estate, stocks, automobiles, gasoline, puppies.
(Granted, getting the hookers to keep proper tax records will be a challenge.)
So far, every proposal I've seen had loopholes for high-income people and/or for business that you could drive a limousine through. Yeah, I know those people cheat already, but why make it legal.
The vast majority of the complexity in the tax code comes from figuring out what exactly qualifies as income. Flat tax proposals like yours address none of the complexity issues.
I think prostitution ought to be legal, but it'd be foolhardy to base all exchange on sexual favors. Actually, on the second thought...
You truly can never escape the two inevitabilities of life: death, and taxes.
I didn't expect the Berlin Wall to come down in my lifetime. It's a long shot, but it's possible that this depression will result in the end of the Federal Reserve and the IRS, both.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Second Life makes this very clear. You own your account. You own your own stuff. You can monetize it. You can even take your intellectual property outside of Second Life and put it on your own server (not that you'd want to, since you'd be alone on your own server). But this is a growing trend for virtual worlds that want to attract and keep content creators.
WoW I suppose is a different kind of virtual world, where it's not so much dependent on user-generated content or user-generated scripts?
So can I deduct my new gaming rig as a business expense?
If they tax gold farming as income, gamers should have the right to deduct their account costs, computer, and internet use as legitimate business expenses (provided they make some money from their endeavors).
When I say should, that is my moral judgment, and it doesn't mean the IRS won't try to screw people.
Well all of your considerable comment aside, MY passive system requires no math and has ZERO invasion of privacy.
I was not thinking of a flat tax rate on an existing system involving the IRS. I was thinking getting rid of the IRS entirely. I was actually thinking something along the lines of a consumption tax. I admit that I misread the comment of the poster I was replying too. I should have not implied that a flat tax has no paperwork, associated control over citizens and their information.
I don't want a flat tax. I don't want the federal government to have the right to tax citizens period. My idea is a little bit more "grand" and ambitious than that.
Through constitutional amendments I want to have the federal government draft a bill that gets sent to all the states *each* year. The states are then responsible for paying their portion of the bill, based on how many representatives they have in the House.
I see it as a problem of competition. The IRS has no competition. If California and Texas were both deciding on how to collect the money in the future, and both Californians and Texans could pick their asses up and leave, I think we would start to see some interesting ways get created to collect taxes. States that decide to use draconian systems based on complicated math, obscure paperwork, and government peering into citizens lives will more likely *have less citizens*. Taxes was one of the reasons my family moved away from California.
A consumption tax based state is one based on a passive system. The taxpayer never needs to calculate *anything*. They just pay for their consumption. No paperwork, no accountants, nothing. A taxpayer can't ever be wrong either or liable to the state. So no reason to seize property, put people in prison, or destroy lives. The entire transaction contains everything that needs to be paid to the state.
Of course this pushes all the responsibility onto business. They already collect taxes for the state so it is not like the infrastructure to do this in most states does not exist already.
What about deductions? I think the whole point of deductions is to give tax breaks to people that have lobbied their positions well. Well if we want to make it easier on the families that have kids, the poor, and the middle class in general how about most states deciding that food and other basic necessities don't have to be taxed? Kind of handles that right at the source real nice and easy doesn't it?
That's the problem with tax breaks. They most often involve the rebates that you mention. That is inefficient. If each state sets its tax rate appropriately, than rebates should not even be necessary. As for other tax breaks and incentives I think states and local cities can come up with their own tax breaks to businesses to improve their own local economies.
This seems to be a pretty fair way to do it. The rich complain endlessly that they earned their money and have the rights to keep it. I totally agree. I think they should be able to pull a Scrooge McDuck and build huge moneybins(tm) to hold all their gold and cash. They can sit in their golden mountains for as long as they want. Till they get hungry. That's when they pay taxes on the hamburger they consume. Till they get bored. That's when they pay taxes for their entertainment. When they want to buy a 10,000,000 USD yacht, they pay taxes there as well.
What could be more fair than that? Most of the arguments I get into over this are about how a working class guy will end up paying a higher percentage of his income to taxes than a rich guy. My answer to that is quite simple. Who gives a shit? The rich guy cannot take it with him when he dies and he deserves it for whatever he is doing that is making him rich. It is not the fault of the rich guy that the working class guy does not make more money. In any case, if the rich guy really wants to live like a rich guy his taxes, although being a less overall percentage, will be many many times that of the wor
"Gaming companies by and large insist that they own everything within the game. Basically a player "owns" stuff the same way a monopoly player "owns" his cards, houses and money, i. e. only in the context of the game. If there is a transition to real world money (gold on ebay), that is already taxable."
Why are you giving them even more stupid ideas? This is Washington we're talking about. Politicians who've never met a stupid idea they didn't like ... like the bailouts.
Mind you, if they're going to start treating all game transactions as real-life, I'm going to play Risk, conquer the world, and tell the IRS their new job is to collect tribute for me.
Kevin Smith on Prince