A new point of discussion for gamers, developers, and taxing officials worldwide-are virtual assets taxable? Journalist and 'Ultima Online' junkie, Julian Dibbell has made this question public. He has earned a fair deal from selling to other players in the real world the weapons, currency, and other goods he had accumulated in the fantasy game 'Ultima Online'. Now, with a new article published in the latest issue of Legal Affairs magazine, Dibbell asks, “Should online game players assets-the weapons, characters, clothing, and such-they've accumulated, but not yet sold for real-world cash be taxable by the  Internal Revenue Service (IRS), in the US.

After all, since the trafficking of virtual goods from games such as 'World of Warcraft', 'City of Heroes', and 'Star Wars Galaxies' on exchanges such as eBay, sets their fair market value. The online game players are collectively holding these digital assets worth millions of dollars at any one time. And some say-that's a target the IRS can't ignore forever, raising the tricky question of whether virtual goods that are frequently bartered and exchanged in the gaming world be deemed a taxable possession before, they are sold for real-world money.

“From the standpoint of economic theory...there's no fundamental distinction between selling euros and buying magic wands,” said Ted Castronova, an expert on virtual economies and an associate professor of telecommunications at the University of Indiana at Bloomington. “They carry value with them. If you're going to tax exchanges in the real world, you've got to tax exchanges in the virtual world, in economic theory.”

The problem, said Castronova, is that it's not about economics. “It's about common sense,” he said. “Common sense says that when people are playing a game of Monopoly, you don't tax (the properties they buy and sell).”

No one knows the exact worth of the virtual assets of the millions of online game players. But with estimates for the sales of such goods going as high as $880 mn a year, the unconverted assets are surely worth similar amounts. Thus, the government's share, if the government were ever to lay its claim, would be substantial.

But observers of online games worry that the IRS doing so, could be a disaster for online games. That's because it would require the constant tracking of the value of every kind of in-game asset and of all nonmonetary transactions. And Castronova doesn't think such an imposition by the IRS would be a good idea.

“That would be insane,” he said. “You could do it. But it would just be a ridiculous burden. These game companies would have to keep a digital record of players' income and sales...It would generate a lot of paper. You'd have to set aside a lot of servers to keep records. It would add to the cost of games.”

In any case, Dibbell isn't sure-whether in future the online game playing will be free from tax forms. On the other side of the hot debate, Castronova hopes that the IRS would see the social value of staying away. “What would be nice, would be a conversation between the IRS and the National Science Foundation,” he said. “The NSF might say, these worlds are really important social investigation tools and that if we treat them as an extension of the real world, they'll lose their value as a place where we try out social experiments.”

Source: www.news.com
Jasmine Kaur  
jasminek@cybermedia.co.in