China Introduces Tax On Virtual Goods: Will Other Countries Follow Suit?

This story was written by Tameka Kee.
In China, sellers of anything virtual--from the gold that is traded in MMO (massively multiplayer online) games to couture designs in virtual worlds--will now face a 20-percent tax on any real-world revenue from those sales. The FT reports that China's State Administration of Taxation has said that the virtual-goods marketa $1.45 billion (10 billion yuan) industry by some accountsis subject to the same tax rates levied on real estate and other markets.

Backtracking on a previous ruling : This is not the first time that China has tried to regulate the blurry line between virtual and real-world economies. Last year, the government cracked down on virtual currencies, forbidding the use of virtual money for the purchase of real items, and prohibiting virtual sellers from flipping for a real-world profit. This new law contradicts that ruling, which Techdirt notes was largely ignored anyway.

But how would they make it work : We've seen that virtual economies can be affected by real-world financial turmoil, but this new proposal raises the question of whether authorities can use real methods to accurately track and tax virtual sales on a massive scale. The logistics behind regulating at least 10 different kinds of virtual currency are likely very complex, but if China is successful, other countries with burgeoning virtual economies (like ours) may follow suit. 

By Tameka Kee