Real Taxes for Real Money Made by Online Game Players
Successful online video game players and Internet surfers in China have found ways to make real money from virtual assets. Now China’s taxman wants a piece of the action.
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.
The policy would cover China’s legions of online gamers, who can use online virtual currency to buy better equipment and new powers for their online warriors. But it also affects millions of others who use virtual currencies on instant-messaging services and Web portals. For example, users of Tencent Holdings’ popular QQ chat service can earn Q-coins they can use to purchase online game equipments and buy e-gifts. Statistics from research firm iResearch show that China’s virtual currency market is growing at a yearly rate of 15% to 20%, and several billion yuan worth of virtual money is traded in the market.
The fast growth already has raised fears among China’s policymakers, who last year restricted the conversion of virtual currency into yuan. Among other reasons cited in this Chinese language Xinhua report, they feared the practice could lead to inflation as well as money-laundering.
This week’s move has become a hot topic among Chinese Web users nationwide. Over 6,000 comments were left by netizens on Netease.com one day after the news appeared on the portal site (in Chinese here).
Many said it’s unfair to tax on individuals while internet companies are exempt. “Tax everything and no refund at all. This time, it even charges 20 percent. No wonder the country’s the world’s No. 1 tax bearer,” wrote one netizen on Netease.com.
In an online poll by the Sina.com, over 70% out of about 3,000 people who voted were against the new taxation decision. The biggest doubt is how the actual sum of property will be evaluated. Blogger Ruan Zhanjiang wrote that, “many game players are classmates or friends in real life, thus most of them won’t have credentials when trading virtual money. It’s difficult to prove the original value of virtual currency, though.” (Original here in Chinese).
Still, some believe the government’s move can help better protect the property right of online gamers. Identity theft has long been a fast-growing problem for online gamers in the high-profit virtual currency trading market.
–Juliet Ye
