In an article entitled China Taxes Profits from Virtual World Transaction, the writers Bill Zhang, David Tang, Joseph R. Tiano, James G. Gatto, and D. Benjamin Esplin say that the State Adminsistration of Taxation has announced it will levy a 20% tax on all virtual currencies. This is because they treat virtual currency as “property,” which is therefore subject to property taxes.
The tax will be payable on the profits accrued as real world currency and not actual virtual currency denominations. Of course, enforcing such taxes may prove to be stunningly difficult. According to Zhang et al., one option is to virtual world providers to monitor and report on all virtual transactions, something that is technically possible but would be nightmarishly difficult to track.
And considering China’s notoriously draconian attitude to “internet freedom,” it seems laughably hypocritical for the government to be curtailing access to online freedom while at the same time wanting to tax any profits. It will be interesting to see if a virtual newspaper or magazine that has open reporting will be allowed to be accessed so long as it pays taxes.
Primary source: White Paper at Pillsbury Law – Virtual Worlds & Video Games section
SL on VL
Are they thinking of taxing virtual profit such as the ones earned in SL? whatever the case, collecting taxes is such a capitalist thing to do, and I’m not against capitalism in anyway. I’m just amazed at things like this.
The word “hypocrisy” springs to mind, especially when it applies to the Chinese government’s attitudes toward freedom of expression. China is a capitalist economy with an aging communist mindset. The government is keen to leverage its ability to provide cheap labor and products while simultaneously not wanting individuals to benefit from the open society that free market capitalism can provide.