Could you imagine receiving an itemized tax bill every month along with your subscription to an online role-playing game? That's a far more likely scenario than you might think -- and it's another manifestation of the growing convergence of the "real" and the virtual worlds.
Writer Julian Dibbell has long studied the sociology of online interactive behavior, and he (along with many other researchers) is fascinated by the economic aspects of the "massively multiplayer" games. Given that the virtual currencies (such as gold pieces used in World of Warcraft) have real, if unofficial, dollar values, Dibbell began to wonder: would the transactions using these virtual currencies be subject to American tax law?
The concept of taxing virtual currencies is not without precedent.
In the United States in the 1970s, so-called "barter clubs" sprung up all over the place as a way for individuals to offer products or services to other individuals without the hassle or paperwork of business licenses and sales receipts. Of course, barter, while useful, is inefficient -- there isn't always a match between what bartering partners need for an exchange -- so the clubs started implementing "barter credits" to serve as a stand-in currency. A sufficient number of transactions happened in this way that the Internal Revenue Service (the national taxation agency, for those of you outside the US) took notice; soon, the IRS determined that these transactions should be taxable, as people were earning goods, services and credits that had real dollar value, even if never actually denominated as such.
What Dibbell found is that the IRS isn't getting ready to tax your WoW gold pieces any time soon -- but that they may consider doing so in the years to come. Right now, around the world, over five million people play World of Warcraft alone, and the populations of other games (such as Second Life, Lineage, Star Wars Galaxies and many more) add another few million more. While this is a substantial number, it's still small enough that the virtual transactions they contain remain under the tax collector's radar.
But it's not too long ago that the #1 game had only about a million players; one can easily imagine a game showing up in a few years' time that gathers a player base measured in the tens of millions. At some point, the economic activity taking place in these games, activity that has a real-world value that already measures in the millions of dollars, will be impossible for governments to ignore.
There's a larger dynamic at work here, too. Increasingly, interactions in online virtual environments both reflect and influence behaviors in the "real" world, from personal and business relationships to political organization and (of course) economic transactions. In some respects, this differs little from other group activities or spaces (such as a sporting event or a theme park), but the layer of virtuality adds complexities that even the World Cup or Disneyland can't match. For example:
I strongly suspect that a virtual presence will become increasingly important to our day-to-day lives over the next decade or so. Important not as a replacement for reality, and not as an escape, but as social augmentation. These environments are, in the end, a medium for interacting with other people, not just pixels on the screen.
