The Tax man cometh !!

Yet another "the sky is falling" post on taxation of virtual funds. This has already been very thoroughly debunked. We're already taxed on the money we make in SL, because we have to convert the Lindens (which are game points until converted) into our local currencies, whatever country we might be from.

This issue was posted by some troll over a year ago and hashed to death in dozens of threads and completely COMPLETELY debunked once already. Do we really need to go through all this again?

She's not a Conspiracy Theorist if there really is a conspiracy.

And there is.

/me starts hammering the dents out of her tinfoil hat.

not from the uk, so i dont know about the integrity of this newspaper, but they report it as fact.
http://business.timesonline.co.uk/tol/business/money/tax/article2326744.ece

was teasing

When it comes to Governments trying to take away more of our money, it is always a possibilty. Just because the idea doesn't make sense, it doesn't prevent some idiot won't try it. That's what governments do best.

Just as long as my tinfoil hat matches my shoes.

Oooo, shiny!

When exactly are we taxed on converting L$ into RL currency? I'm not aware that the UK Government even knows I play SL, so how are they taxing me?

I don't see anyone making "the sky is falling" claims here. People have been discussing whether income from SL is taxable, which certainly in the UK it clearly is, and then whether that taxation should happen in-world or once the money is cashed out. Don't think anyone has threatened to cancel their account, which is pretty rare for any thread recently, or suggested that this will be the end of SL. On the contrary the consensus, if there is one, seems to be that in practice it just won't affect most of us because we don't make any, or very little, money here anyway.

how could a story dated August 26th, 2007 have been debunked a year ago?

Kalel is just upset because he feels L$ are somehow special and taxation should only occur when L$ are exchanged for US$, in spite of the many barter-based arguments I've presented in the past. Therefore, whenever this topic comes up and I outline the case for taxation at L$ receipt, he feels the need to claim that argument has been "debunked". Even though he's never been able to refute the notion that SL is basically a by-the-book barter system that falls under existing tax laws...

So, in summary, don't feed the troll.

Only posted as I thought it might interest some UK based residents.

Mr Brown and his cohorts are rapidly running out of ways to stealth tax us in RL, so I guess that maybe they are dipping their toes into the virtual world with pound signs in their little piggy eyes !!

Hmm im not aware of how barter based taxation works at all.

Not even in the US.

You dont pay taxes on Casino chips until you cash them out though, I dont think.

I wonder though - would the government really be so concerned about taxing the economy inside the game - or ensuring those who DO cash out pay their taxes. Since that is only on the honor system as far as I know.

On the other hand, with people "sheltering" their money in SL investment funds like Ginko, etc ad naseuam. I can definitely see why a government would want to step in and tax that income.

Just because he's named after a Superhero, doesn't mean he's special.....

Maybe he can travel time and debunk stories that happened this week, last year.

As I said.....

If I earn enough in world to be taxed as earnings.. then fair enough, but at the same time if I am deemed as self employed etc then other things hold true also. I dodnt feel it fair to be taxed in the way the standard is though...

Hmmm make about L$5000 a week, so thats $16 or £8 a week, if we factor in the cash out value, the linden conversion rate various overheads ... then that $5000 might seem great in world but totally worthless, in the UK even at 25% tax that would equate to me paying £8 a month BEFORE i even start on deductions and I wreckon my reductions would be more than that. Plus doesnt new businesses get a start up grant and subsidees.

I think the goverment has flagged up online money making schemes like EBAY and SecondLife and correctly realise that there CAN be large amounts of money floating around. BUT .... just like tax havens.... can the goverment tax you on overseas value.....
I really dont know... im totally blank on what i know about this. anything is possible when it comes to taxation but im not particularly scared, the sky ISNT falling in for me, so far I am playing a game and havnt cashed out a penny yet and with the reliability of asset worth being VERY unstable in SL along with assett availability also being very unstable the ONLY thing that as actual value is the Linden at the time of cash out, so Personally if Mr Brown wants his cut at that tme....... he is more than welcome to it. In world... its playmoney and unstable. but what REALLLLY pisses me off as a UK resident is why try hunting game players while large swathes of the unwashed in the UK doesnt want to work.... is sapping of the tax payer etc. Yet I make £50 becasue im good at a game ... im a criminal... anyway, look at SL as a slot machine *lol*, you have less risk..... have higher returns for lower investment standing in a pub and sticking in a tenner on a friday night. And yes I am already taxed on my money.... in the UK taxation is ALWAYS an election breaker and there isnt really any legislation for taxation of online virtual worlds ...gambing at the gee gees yes..... casinos ... most likely... but virtual societies based in a different country, where the money in world has no value... your items dont exist, I think its all a possibility becasue if its taxable Mr Brown wants to know ...especially seeing his LAST job.

I dont think the small fry business or housewife stores should worry too much as it will all be under your taxible income anyway, and untill it happens they CANT really hit you for it...

There ISNT legislation for it yet.... so they cant say ..." ahhhhh but" yet I think that it WILL come so it is best to be prepared... download your transaction logs, plus of course how would it work where something WAS lost in world where you was taxed on it could you call for a tax rebate. This all is essentially a legal nightmare and should be expected but dealt with sensabiliy and carefull *lol*.... hehehehe can you imagine Mr Brown trying to tax a teenager as in world hes a big man in sex clubs

On the other hand, I agree with this particular troll, if such he is. Taxing $L is silly on several levels. Two that come immediately to mind are the "poker chip" theory...$L have no real world value until they are converted into a real world currency. Makes no sense to tax them in game. The other is simply that there is too little value involved, in the vast majority of cases, to be worth the effort of collection. The point at which there IS sufficient value is, arguably, at the point where an individual decides that he has enough $L to make it worth cashing them out and converting them into real money.

thats a point about stealth tax....., mr brown is ONLY in power on the back of Tony, and it is well known that the Current Labour Goverment is the heaviest in stealth taxes in the last 20 years. I think there will end up being ceilings on this anyway, I cant imagine Mr Brown chasing small fry ... only large takers

Barter is taxed at the "fair market value of goods or services received". Picture this situation:

o I'm a lawyer and I help you incorporate your business in exchange for you painting my house.

I would have to pay taxes on the fair market value of an incorporation, and you would have to pay taxes on the value of painting a house. Note that no money has changed hands. We are taxed simply because we're each receiving a service for which we otherwise would have paid.

Now, picture this:
o I help you incorporate. You give me 200 BarterBucks. I give those BarterBucks to you in exchange for you painting my house.

This situation is no different, and we should each still be taxed. The inclusion of an intermediate bookkeeping chit doesn't change the nature of the transaction.

Now, a third example:
o I help you incorporate. You give me 200 BarterBucks. I give those BarterBucks to Joe in exchange for him painting my house.

Even though I'm now transacting with Joe for my house painting, this is no different fundamentally. The BarterBucks still represent the economic value I've created in helping you incorporate. They are a promise of a certain amount of economic value, and should therefore be taxed as such. If I didn't have those BarterBucks, I would have had to pay cash to get my house painted, so by simply having them I'm realizing economic benefit.

Now, change "help you incorporate" to "write a script for you", "paint my house" to "build a house for me", and "BarterBucks" to "L$" and you'll see why taxation of L$ at receipt makes sense in the context of barter taxation laws.

hmmmm

I wonder more every day those who said eventually the L$ would disappear in favor of the USD$ were right.

Poker chips are a bad analogy. Poker chips represent "play value". L$ represent the right to use someone else's IP and can be exchanged within SL for goods and services for which you would otherwise pay money. The fact that they can be used to purchase real-world goods (SLBoutique has sold video cards for L$) and contract for real-world services (scripting, etc.) means L$ *do* have real-world value even without exchange into US$.

i would think with the implementation of "identity verification", especially with the company doing it a known provider of information to government and political parties, (who state themselves they keep a database of the information, despite LL saying they wont), and the IRS being interested in the virtual world and income...yes, i can see them coming up with a way to tax ...and possibly even tax transactions, (sales tax in lindens anyone?)...they certinly would use "identity" information and cashing out information, which LL would legally have to provide to them, to then pursue "tax evaders" they deem large enough to be worthwhile.

while i don't think the sky is falling, or this would be the "death of SL" i do think the "free ride" may well be over...when it was annonymous, unless you followed the "honor system" and reported your earnings, this was "under the table income"

"I've found a new form of taxation",
Gordon said with a smile of elation,
"Your Lindons are mine",
"Though it may take some time",
"To discover who's part of this nation"

The problem comes with WoW Gold. Just as with L$, there are lots of people running businesses by earning gold in WoW and selling it to others for real money - which is exactly what you're doing if you sell your L$ through LindeX on SL. And, likewise, WoW gold does represent the right to use someone else's IP (Blizzard's, in the form of the data packets which tell WoW that your character owns a particular piece of equipment)

If it's ruled that you have to pay tax when you just recieve L$, then by the same logic a World of Warcraft player would have to pay tax when they earned gold. But that means that when a gamer runs amok through the Dungeon of Lord Zog, kills the Big Ol' Dragon and finds 1000 gold in its hoard, he's made a gain that can be exploited for business and has to pay tax on it!

I can understand the need to pay tax for people who are cashing out to RL bank accounts. But for people who just cash out to pay tier, all of their profit is being spent on a deductable expense so presumably there is no tax to pay.

The WoW analogy fails when you consider that (a) unlike L$, exchange of WoW gold for US$ is explicitly forbidden, and Blizzard does take steps to prevent it, and (b) within WoW, transfer of gold isn't done in exchange for "something for which you'd otherwise pay US$".

Within the context of the game world, it *does* make sense for WoW gold to be taxed only upon exchange to US$ (much like poker chips, where the chips are exchanged for "entertainment value" rather than goods and services, and only the net gain counts in the end), whereas in SL the ostensible realities of ownership and commerce, and the support of LL in exchanging L$<->US$ lend more support to the barter economy framework.

I've been keeping straight up books since the day I started IHOS. If taxes ever raise their ugly heads, I plan on writing off my rental space, all the male skins that I have to buy, all the modeling poses, all the upload fees, advertising fees, fashion show fees, payments to other designers, etc etc. It's all recorded down to the last L$. If I end up making more than the USD 400 that's allowed for a hobby, I'll pay taxes on it. We'll see about that though.