The problem is not whether income in online worlds will or will not be taxed. I submit that if online worlds are to (continue to) exist as something more than a gaming venue/temporary fad, then income in those worlds will be taxed, just as is the case in any other world.
Here are a few ideas I have been working on:
- we should be acknowledging that online income already is taxed, albeit indirectly, via the commissions we pay to various plastic/electronic money middlemen
- also, we may soon recognise that online income is taxed by the wrong subject: the economic middleman who enables the transaction, not by a state
The taxation issue will soon be raised, and strongly. This will be different than simply taxing a new economic activity, because online worlds are places, not (just) activities. Why not imagine an online world with a strong social identity upping the ante and declaring that it is, in fact, an independent territory, not subject to taxation from the outside? Yes, the computer the world exists on is in country X, and the activities surrounding that computer are subject to taxes and regulations. But the world inside the computer is a different story. We have already seen weirder things than the one I am suggesting, as in the case of Sealand or in other territorial disputes or unrecognised, self-proclaimed state entities.
We should remember, though, that almost every current state entity began its life as self-proclaimed, and many have remained unrecognised until they eventually were.
When money is involved, solutions are found, one way or another. Why not imagine something similar to customs regulations for the movement of money across states?
What should a national state worry about more: that I earn a hundred billion LindenDollars in Second Life or that I trade that fake money for some Real World currency?
And what should those who claim to have “a life online” worry about more: that money generated online gets taxed at the threshold of Reality or that the online world becomes nothing more than a casino?
