News, research and discussion on virtual goods, currencies and economies globally.

Laws and regulations

20% Tax Rate on Virtual Currency Brokering in China?

"The State Administration of Taxation said on its Web site Wednesday (in Chinese) that China will impose a personal income tax of 20% on profit from virtual money. The announcement, which was distributed to local tax bureaus, specifically takes aim at those who buy virtual currency from gamers and surfers and sell it to others at a mark-up. Taxation officials are granted the right to determine the original price of online virtual currency if the individual fails to provide proof of an original price, it says."- Juliet Ye @ WSJ’s China Journal   Read more

Netherlands Court Finds Criminal Liability and Sentences Two Youths for Theft of Virtual Goods

RunescapeOur friends at MindBlizzard report that a Netherlands court has found criminal liability for the real-world theft of virtual goods from the hybrid free/paid MMO roleplaying game Runescape.

From the post at MindBlizzard:

[T]he court has reached a verdict and has sentenced two boys to conditional detention and civil services because of the virtual theft from the game Runescape. [T]he boys from Leeuwarden, at the time both 14 years old, forced a thirteen-year-old victim to hand over virtual goods, a mask and an amulet, and to transfer the items to their account. The thirteen year old had collected a large amount of credits with which artifacts could be purchased. The boys forced him to a house and there he was kicked and threatened with a knife, until he transferred the goods and credits.  Read more

Legitimizing virtual consumption

A Japanese lunch box imitating a virtual mushroom

Greg Lastowka over at Terra Nova writes about the way Sulake limits the amount of money users can spend on virtual goods in Habbo. I’ve written a little bit about the topic in a paper that has been in review for a long time. Basically what interests me in it as a researcher of consumption is how a certain type of spending is legitimized and becomes socially acceptable. Lots of products from jazz music to microwave meals were initially “improper” consumption, not something a respectable person would buy. Gradually, in a process were advertising played no small part, people accepted those goods and started to consume them. At the same time, they left behind some of their earlier ways of consumption.  Read more

The virtual tax question

Are virtual assets tax-free? Should Blizzard pay taxes for the gold it earns by selling items to World of Warcraft players? Professor Theodore P. Seto’s analysis of the taxation of virtual assets is the first to distinguish between businesses and ordinary users. In this post, I attempt to explain and comment on his paper.

The discussion on how virtual assets are and should be treated by the taxman is becoming increasingly relevant as business based on virtual assets grows. The taxman wants to make sure that businesses involving virtual asset transactions are treated on an equal basis with other businesses. At the same time, publishers and gamers want to make sure that ordinary gameplay is not hampered by interventions from tax authorities.  Read more

Sweden moves to tax in-game transactions

Swedish Tax Agency About a year ago, there was a story ricocheting on some news sites about Sweden planning to impose taxes on virtual property sales. It turned out to be a bit of a dud: all they wanted to tax was real-money income, not in-game transactions. Real income, regardless of its source, is supposed to be reported to the taxman anyway. Swedish WoW players would not have to include epic drops on their tax statements, nor would Second Life entrepreneurs be required to report their profits — unless they convert the virtual income to real money, I deduced.

However, nine days ago the Swedish Tax Agency posted a statement/ruling on their website, titled “Virtual worlds — value-added tax” (“Virtuella världar — mervärdesskatt”). In it, the agency states that in-game transactions may incur liability for both value-added tax as well as income tax under Swedish law. Below is my translation of the summary part of the statement interspersed with some analysis.  Read more

Virtual law bibliography

Greg Lastowka at Terra Nova has put together a wonderful bibliography on virtual world related articles in law journals. Several of them deal with virtual property and virtual economies.

Dutch teen arrested for Habbo burglary

According to news reports, Dutch police have arrested an unnamed 17-year-old on suspicion of having stolen 4 000 € worth of virtual furniture from other users in Habbo Hotel. The teenager is said to have hacked into others’ accounts and transferred the items into his own account.

This kind of incidents are not uncommon in various virtual worlds and other services where valuable virtual property exists. But what caught my attention was the somewhat large alleged value of the loot as well as the fact that the suspect is said to be charged with “burglary” in addition to the hacking crime. Burglary, at least in English common law, means breaking into a building with the intent to steal.  Read more

Virtual promises are easy to break

Robert Bloomfield posted a story at Terra Nova with the rather dramatic heading Financial Market Meltdown in Second Life? It’s a description of unfolding events that demonstrate how difficult it is to create security markets in virtual economies. Securities are essentially promises: exchanges of money now for money in the future. Problems arise when someone fails to keep their promise.  Read more

Second Life moves to China, becomes family friendly?

Shanda, one of the leading MMORPG companies in the world, plans to create a new service similar Second Life. This was reported today by Financial Times, quoting Shanda’s founder and chairman Chen Tianqiao. According to Chen, the Nasdaq listed company wants to diversify away from fantasy worlds, but he wouldn’t say anything about release dates.  Read more

When scarcity is threatened

Cosplayers (CC) JanneM An executive from Shanda Interactive has been handed a sentence in a Chinese court for creating virtual assets out of thin air and selling them through accomplices to players. This is according to PlayNoEvil’s report of a story in China Daily yesterday. The copying took place in The Legend of MIR II, a popular Korean MMORPG operated in China by Shanda.

The story helps to highlight how the value of virtual assets is often based on their artificial scarcity. Many virtual assets are positional goods, meaning that their value is derived not from their absolute attributes, but from the relative advantages they confer compared to other goods of similar kind.  Read more