Property and Taxation of Virtual Worlds.

ExtremeMortman points to the Washington Post article, 'Where Real Money Meets Virtual Reality, The Jury Is Still Out' and asks, "So here’s the obvious question — why not virtual taxes?"

It is not an easy question, though it might seem so on the surface. From a taxpayer's perspective, Heinlen's quote keeps popping to mind:

First, what is it you want us to pay taxes for? Tell me what I get and perhaps I'll buy it. -- Robert A. Heinlen, The Moon Is a Harsh Mistress

It's not as though taxpayers have much to say on the topic right now, so it is quite likely that there will be a tax of some sort. After all, if a tax is implemented when a distinct minority of the global population have hands on knowledge of virtual worlds, there will be a tax when more people flock to virtual worlds. Has a tax ever gone away? Look out for H&R Prim in SecondLife.

But reading the article in the Washington Post doesn't reveal much about taxation of a virtual world (Reuters has had the best coverage so far). Instead, it discusses the negotiation of what 'property' is:

...Linden Lab made cyber-history when it gave Second Life users the intellectual property rights to their creations -- similar to the copyright real-world authors have to their writings. By contrast, most Web sites offering virtual experiences have not accorded users any property rights, requiring them to accept a license agreement stating that all content belongs solely to the Web site owner.

Four years ago, several online gaming veterans tried to get around this agreement and make real money by selling game items from Dark Age of Camelot on eBay and at specialty online auctions. The items, which included weapons, armor and specialized characters, in some cases went for more than $300 each. The developers of the Camelot game blocked them. When the gaming veterans sued, claiming that they had rights to the items they acquired in the game, a federal court in California ruled against them on the grounds that the license agreement took precedence. Other recent U.S. court rulings in virtual disputes have come to similar conclusions...

In fact, Section 3.3 of the SecondLife Terms of Service recently had 'Your intellectual property rights do not confer any rights of access to the Service or any rights to data stored by or on behalf of Linden Lab.' added. Most people seemed to have missed that, probably because at a glance it seems intuitive and a non-issue - because of the assumption that what one creates can have no value in the 'real world'. That assumption should be taken to task a little more vigorously.

Keep It Simple...

But let's roll this around and make it very simple. If we consider a virtual world such as SecondLife akin to a micronation, then 'citizenship' within SecondLife is a reality. Taxes are paid to Linden Lab for (1) Owning property and (2) accessing the data structures of SecondLife. In turn, Linden Lab pays the United States government taxes (we hope). In this way, taxes are paid and there are services rendered for the taxes. While there are complaints about the services, these complaints are always directed to Linden Lab - not any government. You don't go see your elected representative in your country when you have a problem with SecondLife (and if you do, there are deeper questions about that).

Now, if individuals are taxed by governments for money made in a virtual world, one has to wonder what is being bought - what service is the government providing for virtual worlds? One answer could be assuring Network Neutrality and deconstructing telecom monopolies - assuring equality of access to content. That would be a tax I'd chip in on, but the governments of the world don't seem too awfully interested in dealing with those issues. What they are interested in, apparently, is taxing people without providing anything. Under different circumstances, that could be called extortion.

In the end, I suppose one can make income from SecondLife and other virtual worlds reportable - it probably should be - but it seems a little odd that one should pay taxes on things where no service is provided. So my question is:

What services do governments intend to provide for virtual worlds which are worth paying for?

That's the romantic. The realist knows that taxes are coming when they can impose it upon a minority before it becomes a majority. That is sort of like voting in a President when more than 90% of a country is on vacation, in the context of the United States.