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Role Playing (Games) Government The Almighty Buck Politics

South Korea Now Officially Taxing Virtual Worlds 70

Posted by Zonk from the i-see-that-sword-pay-up-you-tax-dodger dept.
Next Generation is reporting that the South Korean government's goal to get their cut of the real money transfer industry is now in the works. Folks who sell over $6,500 worth of virtual goods or currency in a given year will have an automatic Value Added Tax (VAT) withdrawn by the service they contract through. That is, the middleman service will remove taxes automatically for these repeat customers. If a South Korean sells over $13,000 worth of goods or currency in a given year, the government considers them a small business. As such, individuals in that position are required to obtain a business license and take care of taxes themselves. "An NTS official claims the organization will be able to monitor all transactions as RTM mediators have agreed to share clients' transaction details with the authorities. 'NTS would be able to track all transactions for taxation of virtual items,' Mr. Choi said. 'This is not about defining RMT legal/illegal; we don't see any contradictory facts to Amendment for Game Industry Promoting Law - we are not about to judge if RMT is legal or not,' he added."
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South Korea Now Officially Taxing Virtual Worlds More

South Korea Now Officially Taxing Virtual Worlds

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  • No, they're not (Score:5, Informative)

    by faloi ( 738831 ) on Monday July 02, 2007 @03:34PM (#19721025)
    They're taxing real money that people make for selling virtual goods.
    • Good to have that pointed out early. Really, this isn't much different from any other tax: real money changes hands, and the government takes a cut.

      • Re:No, they're not (Score:4, Insightful)

        by east coast ( 590680 ) on Monday July 02, 2007 @03:56PM (#19721307)
        Good to have that pointed out early.

        That won't matter. We're still going to have 80 14 year olds crying that they're being put down "by the man" and explaining that this is nothing new (as far as taxation goes, at least) is going to do nothing but have them calling you a governmental shill.
        • Not 79? Surely you mean 79 14 year olds. Methinks you have miscounted. Can't possibly be 80.

           

        • Re: (Score:1, Flamebait)

          by gad_zuki! ( 70830 )
          We're still going to have 80 14 year olds crying that they're being put down "by the man"

          Hello. Welcome to slashdot!
        • It wouldn't be an issue if we didn't still have all the fricking flamebait headlines. Every SINGLE time this issue comes up, the headline is always "Someone is taxing virtual worlds" and in every single case that is woefully incorrect.

      • > Good to have that pointed out early. Really, this isn't much different from any other
        > tax: real money changes hands, and the government takes a cut.

        Mr Sarcasm says: Really, this isn't much different from any other protection racket: real money changes hands, and the mob takes a cut.

        In exchange for not...is it hurting or jailing you? Oh, yeah. You have a 0.0000001% change of affecting your tax situation, making you much more powerful with respect to the mafia situation.
    • A better article headline might be "South Korea making sure sales tax applies to virtual goods sold for real money" but that wouldn't be as inflammatory and probably wouldn't fit anyway.
      • How about "South Korea taxes domestic sales involving its official currency"? That's pretty generic (yet accurate).

        I don't see how it's any different from taxing Ebay sales...I'm not exactly fond of the idea, but it's the same. If you buy something in USD, I'd expect that a USD tax could be applied to it, assuming it's bought within US jurisdiction. Same goes for Korea. I agree that the topic title is inflammatory...but if cash money is exchanging hands (not just Lindens or Gold Pieces or credits), the
    • I don't get it... I expect stuff like this from Newspapers....but /. ? Maybe I'm missing something but are articles weighted on how may people click on them?

      • Actually, on the contrary (Score:5, Insightful)

        by Moraelin ( 679338 ) on Monday July 02, 2007 @04:54PM (#19721989) Journal

        I don't get it... I expect stuff like this from Newspapers....but /. ? Maybe I'm missing something but are articles weighted on how may people click on them?


        Actually the exact opposite is probably true. Most newspapers, at least in the western world, discovered around the start of the 20'th century that it pays to at least pretend to be impartial. Yes, they still aren't really impartial, and they still kept their opinion columns (although at least now they're more or less marked as such, and not as hard news) but they're a lot more subtle in their manipulation than that.

        It's not even as much doing the morally right thing, it's just business. At some point the public as a whole was largely fed up with the hyperbole- and libel-ladden pieces of journalism and pamphlets of the 19'th century. So someone discovered, much to their surprise, that they actually have more readers if they just report the news, instead of fabricating it or outright telling people what to think about it.

        Again, I'm aware it's still nowhere near perfect, and even "impartiality" means something slightly different to the media than to the rest of us. I'm not entirely naive, trust me. I'm just saying it used to be a lot worse. "Protocols of the Elders Of Zion" kinda bad, or claiming that Lincoln was at the head of some subversive African conspiracy. Inventing ridiculous super-villain-type plans of your opponents (e.g., that they're actually proposing building sewers or a subway so they can blow their own capital up from below, when their Illuminati masters order it) used to be just business as usual.

        At any rate, nowadays an actual printed newspaper would be a lot less blatantly inflammatory there. Even if they wanted to manipulate you into being for or against it (which actually newspapers themselves don't often do, but is often is the case with PR pieces submitted as news), they'd work hard into making it look like they just gave you the data and you reached the "whoa, it's evil" conclusion yourself. Especially in PR there are people damn skilled at _not_ looking blatantly partisan. It would involve some interviews, some impartial study maybe, and in "journalistic impartiality" tradition it would involve two conflicting points of view, and they're not telling you which of the two to believe. (Just incidentally the one pro-taxing ends up saying the wrong things, and causing a "well, I'm not siding with _this_ guy" reaction.)

        Unfortunately, (or maybe fortunately, you can choose) Slashdot stories are rarely submitted by real journalists. They're _usually_ submitted by nerds who never figured the "pretend to not tell people what to think" part, so they outright go ahead and do that. Some (though not all) even have an axe to grind, an ideological crusade to fight, and a messiah complex to save you all from the evil corporations/government/current-economic-model/wha tever. So, yeah, expect inflammatory stuff like this.

        It's not like it's the first time anything like this happened, anyway.

        • Re: (Score:2)

          by bit01 ( 644603 )

          They're _usually_ submitted by nerds

          No, they're usually submitted by marketers. They fraudulently astroturf wholesale in the comments as well.

          You just need to look at the quantity of "product announcements" before products are even released to see that.

          Vista and iPhone are recent examples. Practically daily content-free propaganda, sorry "stories", for months beforehand.

          ---

          Paid marketers are the worst zealots.

          • Well, there probably is a lot of that too, but I'm left scratching my head what would someone actually want to sell via _some_ of the stories. Take this one, for example. Whose marketter is trying to paint the South Korean government in a bad light, and exactly what are they selling, anyway?

            The gold farmers make less than 1$ per hour, last I've read about it, so they're not quite in a position to hire a good PR firm and manufacture news.

            Plus, their interests are better served by other kinds of articles, lik

        • Re: (Score:2)

          by DrSkwid ( 118965 )
          I don't know where you live but the popular papers here certainly do push opinion on the front page.

          But don't take my word for it :

          http://www.nmauk.co.uk/nma/do/live/historicpage [nmauk.co.uk]

      • Re: (Score:2)

        by mikael ( 484 )
        I don't get it... I expect stuff like this from Newspapers....but /. ? Maybe I'm missing something but are articles weighted on how may people click on them?

        As an editor on a national newspaper once told his journalists: "never let the facts get in the way of a good story"
    • Oh. I was hoping on paying my taxes with virtual money. :(
    • all together now, slashdot editors : sort your shit out!!

      can we please have the informative, often funny, geek news site back? less of the flame inspring / woefully incorrect / press release bullshit!
    • Actually, they're taxing the sale of virtual goods for real money, not the money itself. "Income tax" is not a tax on "income", but a tax on the /source/ of income (or activity which produced it), for which "income" serves only as the measuring stick for the tax.

  • Exactly how it should be handled.... (Score:4, Insightful)

    by MaineCoon ( 12585 ) on Monday July 02, 2007 @03:38PM (#19721069) Homepage
    ... and frankly, US tax law already handles the situation, but it is up to the individual to report their income.

    South Korea simply made a law that requires the transaction service being used to apply the tax.
    • ... and frankly, US tax law already handles the situation, but it is up to the individual to report their income

      However, that is largely unenforceable. Hence why stories such as this _are_ news.

      • Re: (Score:3, Insightful)

        by AuMatar ( 183847 )
        Not really. If you're making a few hundred a year, sure. But in that case the government doesn't give a shit, it isn't worth its time. If you're making a few thousands or tens of thousands, you run a risk of being caught and prosecuted. In this bracket, its not worth the risk of not reporting.

    • Re: (Score:3, Informative)

      by Muki61 ( 123481 )
      Actually, US tax law does not cover the situation. You are confusing two different taxes. VAT is not the same as income tax. VAT is similar to sales tax, not income tax. US tax law does not currently have a sales tax for internet sales, unless the seller has a place of business in the buyers tax area. But yes, if the seller makes income on the sale, they do have to report and pay income tax.

      • Re: (Score:1)

        by yada21 ( 1042762 )

        Actually, US tax law does not cover the situation. [snip] if the seller makes income on the sale, they do have to report and pay income tax.
        Unless income tax runs some kind of honor system these days, it sounds like the law does cover it.

        • Re: (Score:3)

          by Harik ( 4023 )
          Congrats, you successfully managed to snip out the part where he pointed out that the VAT (what's being enforced in South Korea) isn't the same as Income Tax like we have in the US. It's a sales tax.

          Your post is like where you take a car and drop out the engine and wonder why it doesn't work! There, an analogy!

          • Re: (Score:1)

            by yada21 ( 1042762 )
            On what grounds do you assume I don't know the difference? GP said US tax law, he didn't specify what kinfd of tax, and then contradicted himself.

  • Happens here too... (Score:1, Informative)

    by Anonymous Coward
    http://en.wikipedia.org/wiki/Income_tax_in_the_Uni ted_States [wikipedia.org]
  • The terms of services say the items and currency = $0 and the taxes are applied by middle-man?
    so if you use ebay that you don't have to pay the tax?
    also what games like Second Life where you buy and sell from the people running / making the game with out a middle man?
    • the people running/making the game most likely are already taxed, so that's taken care of

    • Re: (Score:2)

      by Thansal ( 999464 )
      ebay would basicly be the middle man in this.

      And in second life the ingame cash has a real world value (if I remember correctly), and thus that would be income/investments/net worth.

      All this is doing is enforcing income tax. They sell something for $$, and the govn't taxes the transaction.
      • Does the South Korean IRS tax you on ebay sales?
        also for a small business can you wire off the costs of playing the game?

    • Re: (Score:2)

      by EMeta ( 860558 )
      In the eyes of most governmental revenue agencies, value of goods sold = amount that was paid for them. If you use eBay, like if you sell in the US, you are required to declare the income yourself. The law just made it mandatory for middleman services to facilitate this taxation. Should anyone selling more than $6500 of a type of good have tax on it? I suppose that question is debatable, but I'd rather see these gaming goods taxed than higher taxes on food or say, my income.
  • Virtual worlds are now officially taxing you!
    • What a stupid joke.

      In North Korea, if you are so much as caught with an unauthorized radio, you are as good as dead.

      I doubt a North Korean could get access to a computer unless it was part of his job. And if so, then he had better use it for that job and nothing else. Attempting contact the outside world in any way is treason.
  • Maybe I missed something, but...

    [this] is not about defining RMT legal/illegal

    Ummm.. can you tax illegal money transfer? And, like, imprison a thief for tax evasion along with, say, robbery? If they're taxing it, doesn't it HAVE to be legal?

    • Re: (Score:3, Informative)

      by Lordpidey ( 942444 )
      Al Capone wasn't arrested for bootlegging, but for not paying taxes.

      • Al Capone wasn't arrested for bootlegging, but for not paying taxes.
        Let's see here - that is a tough decision. Booze or taxes ... booze or taxes ... I guess I'll have to flip a coin. ;-)
    • In the US the answer is yes.

      You may want to checkout Tax Evasion issues that Organized Crime deals with.
      Heck, Al Capone got nailed with Tax Evasion.
      • One of the things the government likes to add to the list of charges are that you didn't buy your marijuana tax stamps.

        And, ironically, you are supposed to be able to go down to the post office (or somewhere) and be able to buy them, no questions asked.
    • If they're taxing it, doesn't it HAVE to be legal?

      Nope, the IRS explicitly says that any money you get, legal or illegal, must be reported and can be taxed. It's just one of those ways governments have of artificially increasing the severity of the charges against someone.

      • In the UK, the 'proceeds of crime' act allows the government to sieze anything gained from illegal activity. Of course, then they have to demonstrate it's illegality first, rather than just pretend it might be legal, and tax normally :).

    • Re: (Score:1)

      by WaXHeLL ( 452463 )

      Ummm.. can you tax illegal money transfer? And, like, imprison a thief for tax evasion along with, say, robbery? If they're taxing it, doesn't it HAVE to be legal?

      No. The IRS rules clearly state that you're required to report ALL income, including income from the black market, illegal sources, etc.

      As was cited earlier, Al Capone was convicted of tax evasion. It doesn't matter if you're out there selling weed or working as a hooker, that income has to be reported and properly taxed.

      • Re:Should I RTFA? (Score:5, Interesting)

        by UbuntuDupe ( 970646 ) * on Monday July 02, 2007 @04:26PM (#19721613) Journal
        Okay, people keep saying this ... but when I report my "drug sales" net income (after amortizing my .45 and deducting bribes), won't they just turn that right around and charge you with a crime, implicitly requiring you to waive the fifth?

        No, I'm not asking for personal legal advice, all you lawyers out there. I'm just asking if information disclosed this way has some special legal protection. It won't apply to me, since I don't sell drugs, so don't fret.

        I might as well mention what the real problem is here, since people keep saying, "if you make a profit in terms of real dollars, that should be taxed, case closed". But if virtual money becomes liquid and convertible enough, government will *have to* tax it directly, even in-game. Why? Imagine this:

        I want to defer taxes on dividends, like, you know, every investor with a taxable account wants to do. So let's say the stock exchange sets up "exchange dollars" (EDs), a special currency created and destroyed at will, simply by depositing a dollar or withdrawing it. The EDs are functionally identical to normal dollars, it's just that they only trade on the exchange. Whenever a corporation pays a dividend, it takes its normal dollars, buys EDs, and distributes the dividends. Whenever a corporation raises funds in an IPO, it takes the EDs and converts them to normal dollars. Now, should the investors still pay taxes on the ED dividends they got?

        If you say no, then you don't think dividends should be taxed, because this scheme could be implemented today on the stock market -- but obviously, the government wouldn't fall for it.

        If you say yes, then you agree that sufficiently-convertible virtual dollars should be taxed even if the profit exists only in-game. At some point, the virtual dollars become like the EDs or a foreign currency.

        • Re: (Score:1)

          by IQgryn ( 1081397 )
          I believe that the money would be taxed as soon as the investors converted the ESDs back into regular dollars, just as the game money is being taxed when it is traded for real money.
          • So, you don't think dividends should be taxed, and all investors are overlooking a way to defer taxation of their dividends?

            (Remember: simply delaying the point at which you are taxed on your total gain can increase your returns, even though you "still pay taxes" at some point.)

            • Re: (Score:2, Insightful)

              by IQgryn ( 1081397 )
              As long as the money is taxed, along with any interest gained on it while it was in the alternate currency, I don't see a problem. The goal of taxes is (hopefully) not to prevent profit, but to ensure that a portion of all money earned goes towards the public good. If the money is effectively removed from the economy, there is no need to tax it until it is returned. It would be different if the virtual currency were being traded for real goods, since then the virtual currency isn't really virtual anymore
          • Since EDs are backed by real USDs, a person could, without too much trouble, live without ever cashing out.

            • Re: (Score:1)

              by IQgryn ( 1081397 )
              Not until stores start accepting EDs; you'd still have to exchange them for real money, and that income (the real money) would be taxed. If EDs do become accepted as money, then the government could tax them, and you could pay with them.

        • Okay, people keep saying this ... but when I report my "drug sales" net income (after amortizing my .45 and deducting bribes), won't they just turn that right around and charge you with a crime, implicitly requiring you to waive the fifth?

          Report it as coming from something else. You might create a front organization for your drug trafficking operations that looks like a legitimate business and funnels money through all kinds of weird processes (labelled as seemingly legitimate expenses, charitable donation

          • You need to define legal tender - if you mean, specifically, a medium of exchange that anyone who accepts cash is legally required to accept as cash*, then I agree with you (because the alternative is to make your legally-mandated medium of exchange completely valueless...and effectively to make counterfeiting not a crime). However, legal tender and taxation have little to do with each other. Regardless of whether or not your transactions are consummated with US dollars, you are legally obligated to pay tax

        • Okay, people keep saying this ... but when I report my "drug sales" net income (after amortizing my .45 and deducting bribes), won't they just turn that right around and charge you with a crime, implicitly requiring you to waive the fifth?

          They can't directly charge you with a crime AFAIK, though perhaps they might be able to if you did something really boneheaded, like write "illegal drug sales" in the "type of business" section of your tax return.

          However, your tax returns can be used as evidence agai

          • Wow, I'm surprised this has withstood constitutional challenge. I mean, you're *required* to report income, which is in essence, a confession to a crime. I don't know how you can more clearly violate the fifth amendment right against self-incrimination.
            • You can report THAT you got income without disclosing HOW you got the income. List it under "anonymous donation" or something.

        • EDs already exist, and they're called dollars. This ED scheme is no different than if you had a dollar-denominated account at the exchange, and dividends simply credited your account with a USD amount, which you could cash out at will or have it credited to any debts you incurred with the exchange.

          Or to put it another way: dollars, in the general case, exist as credits to accounts. You don't have to be given actual dollar bills for that to count as income; it is sufficient that some account that you own

          • An ED is a security that gives its holder ownership interest on a dollar in some account that the ED issuer owns, without allowing the issuer to use or dispose of the dollar in any other way than paying the ED holder. If you own an ED, you indirectly own the dollar that backs that ED, period. If you come to own a dollar you didn't own before, that's called "income."

    • Here's an article that tells about how they sent law enforcement to a music festival in Tennessee, not to stop drug use, but specifically to collect the taxes that are due on those drugs.

      http://www.wbir.com/news/local/story.aspx?storyid= 46251 [wbir.com]

      So yeah, tax authorities don't care if you're doing something illegal or not, they just want their money.

    • Re: (Score:1)

      by Fongboy ( 712864 )
      According to the IRS, yes they do tax illegal activity. They just want your money... who cares where it came from! =)

      You can see it here:
      http://www.irs.gov/pub/irs-pdf/p525.pdf [irs.gov]

      Go down to page 28 under the section titled "Other Income". There's all sorts of funny stuff there like bribes, kickbacks, and illegal income (where they specifically mention selling illegal drugs). They figure that nobody actually reads the instructions that come with the 1040 forms. I guess I'm just obsessive-compulsive about fillin
  • They outsource/move their farming operations outside of SKorea.How they will be taxed?
    The people making money from this are usually well organized.
  • I like that they are not going to make RMT illegal, at least in South Korea - because with all the negative focus on RMT recently I frankly had a scary feeling that it'd end up being just a nother limitation on a long list of unnecessary subduement. Let's hope our own politcians are just as wise.

  • Adding Accountancy Skill to My Mage (Score:3, Funny)

    by Hoi Polloi ( 522990 ) on Tuesday July 03, 2007 @10:26AM (#19730333) Journal
    HR&R Block will be starting up a server in WoW every March. All characters will be required to finish the "Form 1040" quest.

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