Can I make you some bucks?

how the net is transforming the way we work and earn

Should we tax virtual income? May 5, 2008

Paying Tax. Something everyone looks forward to. And who wouldn’t eagerly anticipate the day when their slogging earns them enough to have some of it deducted by government? I know I do – said with all the sarcasm I can muster.

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But it’s all part of the you-scratch-my-back and I’ll-scratch-yours policy. So I suppose I shouldn’t really complain. After all, my first pay-cheque (when I do receive it) might help improve something like the state of South Africa’s roads. Imagine a pothole-free South Africa – if you’ve ever been to South Africa you’ll understand? And all from paying your taxes? Wow, the Receiver of Revenue should pay me to work in their PR department.

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But I digress. The point is that we pay our taxes, well some of us do. Others, like Wesley Snipes seem to have better things to do with their money. He was recently sentenced to three years in prison for tax evasion. He isn’t the only one though. Richard Hatch , who won US Survivor in 2000, and Gordon Ramsay , celebrity chef, are two other celebs who have also been charged with tax offenses recently. In Ramsay’s case he was forced to pay a 450 pound fine for missing certain tax deadlines. When it comes to policing tax, governments are relentless. And so they should be, some would argue.

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Despite my cynicism, I do see how paying tax benefits the tax-payer. But what about income earned in a virtual reality world like Second Life? Should people be taxed on their virtual money and assets and if so how will governments regulate this?

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The Swedish government seems to think so. This officiousness shouldn’t surprise anyone after all Sweden was one of the first countries to set up a virtual embassy in Second Life.

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It would make sense to tax any virtual earnings which have can be converted into real-world income. This would affect Second Lifers like Anshe Chung who was one of the first virtual reality millionaires. She began selling custom-made animations in Second Life and used the profit to buy and develop virtual land as part of her Second life estate agency. Chung also owns several Second Life shopping centres and virtual clothing stores.

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And it’s because Linden dollar, the currency used is Second Life, and Project Entropia Dollars (PED), the currency used in another virtual reality game , can be converted into real-world dollars that there should be some sort of tax regulation. After all there are cases where virtual money has been converted into real-world income. Brad Welch is one such case where PED where used to pay for his $10,000 dollar hip-replacement surgery. There is also the case of Julian Dibbell who says in his blog :

On April 15, 2004, I will truthfully report to the IRS that my primary source of income is the sale of imaginary goods, and that I earn more from it, on a monthly basis, than I have ever earned as a professional writer.

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It makes sense to tax virtual money which is used as real-world income even if it was earned in virtual reality. But what the Swedish government is proposing is that even in-game transactions should be taxed. A statement they released says the following:

Transactions between participants in a virtual world, where the deal is about the sale of a “product” or a “service” against reimbursement in an internal currency, should be considered, according to the Swedish Tax Agency’s ruling, [actual] sales of electronic services, if the internal currency can be exchanged to a valid legal means of payment. If the internal currency cannot be exchanged to money, the transactions should not be considered [actual] sales.

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You’re probably thinking that that’s a summary of my ramblings. Well, not quite. See what this means is that you will be taxed on virtual money or assets regardless of whether or not you actually convert it into real currency.

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Think of the implications this will have for players of games like World of Warcraft (WoW). This is a massively multiplayer online role-playing game which involves fighting monsters, going on quests and developing the skills of your character. In order to progress in WoW a player can buy WoW gold or can exchange things like swords for things your character might need. Can you imagine being taxed for this? Or perhaps being taxed for all your virtual reality assets like your swords and castles?

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And if players are going to be taxed for their virtual reality assets what does that mean when the player dies? Will this player’s heirs be forced to pay estate taxes?

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The Swedish government is also trying to introduce legislation which taxes players who earn over a certain amount in virtual reality. According to a statement released by the Swedish Tax Agency:

The Agency also finds that a participant who, without carrying on a trade, independently and with certain permanence sells electronic services for more than 30 000 Swedish kronor [about 3 000 €], is carrying out an activity that is professional according to chapter 4, 1 §, first paragraph 2 of the value-added tax statute.

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Understandably, governments are worried that virtual reality makes tax evasion and money-laundering easier. Perhaps there is some need to regulate virtual reality money. But please, let’s be sensible about it. The you-scratch-my-back and I’ll-scratch-yours policy doesn’t apply if governments are going to tax players for virtual-reality assets which never leave the virtual world. Surely if anyone is going to be doing the taxing it should be virtual governments. But since there aren’t any , maybe it’s the job of companies, like Linden Lab and Mindark which created these virtual reality worlds.

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Consider this section of Second Life’s Terms of Service:

1.4 Second Life “currency” is a limited license right available for purchase or free distribution at Linden Lab’s discretion, and is not redeemable for monetary value from Linden Lab.

You acknowledge that the Service presently includes a component of in-world fictional currency (“Currency” or “Linden Dollars” or “L$”), which constitutes a limited license right to use a feature of our product when, as, and if allowed by Linden Lab. Linden Lab may charge fees for the right to use Linden Dollars, or may distribute Linden Dollars without charge, in its sole discretion. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the terms of this Agreement, and are not redeemable for any sum of money or monetary value from Linden Lab at any time. You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, in any general or specific case, and that Linden Lab will have no liability to you based on its exercise of such right. (My emphasis)

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With so much control over its currency, what really separates Linden Labs from a real world government? It would make more sense for these companies to decide how virtual money and assets are taxed.

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The Power of Bimbo Bucks

Filed under: virtual money — Nicole @ 7:29 pm
Tags: , ,

My last post explored the link between virtual spending and consumer habits in reality. So is it really possible for the one to influence the other? Here’s a bit more information for you to mull over.

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According to research done at the Bailenson Virtual Human Interaction Lab the way you behave in a virtual reality affects behaviour in reality. Time spent in virtual reality blurs the distinction between your virtual and real self. Jeremy Bailenson, a professor at the Stanford Virtual Human Interaction Lab, says that what happens in virtual reality doesn’t necessarily stay there. Experiments in Bailenson’s lab have shown :

That what you experience as your digital doppelgänger lingers after you power down the PC—and bleeds into your real-life identity, at least for a while. His Stanford research team has begun exploring how those virtual experiences might be used to tweak who you are, for better or worse.

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There are arguments that a virtual self is seen to be an extension or type of self-representation. Bailenson says:

It only takes 90 seconds of exposure to a mirror image transformed in age, height or gender to cause drastic changes in behaviour.

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Then there is the Proteus Effect. This looks at how the characteristics you adopt in virtual reality are transferable to real life situations. For example someone who is given a tall avatar tends to behave more aggressively in virtual bargaining situations than those with shorter avatars. When the same task was repeated in realty, the person who had the taller avatar still behaved more aggressively.

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If having a tall avatar can make you more aggressive in real life then strutting around virtual reality as an emaciated bimbo must affect young girls. And perhaps the creators of Miss Bimbo have finally realised this as they’ve removed the option of giving your virtual bimbo diet pills.

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But I’m not convinced. Will this really make a difference? After all, the aim of Miss Bimbo is to keep your bimbo as thin as possible and, as I discuss in my previous post, you are encouraged to spend your virtual money ensuring your character stays that way. If the research from Bailenson Virtual Human Interaction Lab is correct then this virtual spending is likely to influence real world spending.

 

bringing-up for bimbo bucks April 29, 2008

Filed under: virtual money — Nicole @ 3:30 am
Tags: ,

It was over tomato-flavoured Crinkle Cut chips and a can of coke that my 13 year old self learnt about capitalism. You see, I was one of those very loyal fans of The Sims. One who would sit munching away on MSG and lots of sugar while playing the role of a fatalistic virtual reality god deciding on everything from the colour of my character’s hair to his or her career.

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Harmless fun I used to think. I never gave much thought to why every one of my characters had to have a house filled with books or why I made those poor virtual reality blobs (as let’s face it that’s what they are) read so much. To me it was all part of the game. But in a lot of ways The Sims was a microcosm of the real world.

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If you wanted the double-storey house with the impressive pool, aka success, you had to work for it. It was as simple as that. So one of my first lessons in getting ahead was from playing The Sims where I learnt that studying meant a good job to fund that all important retail therapy spree ( can you hear the excitement in my voice?).

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Okay, so let’s just say I’ve ignored that lesson. That I love books and learning from them because … well I do and not because of the money they may bring me. The point is that this game was part of my subtle initiation into a capitalistic society which values money above all else.

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It is worrying if you consider the latest virtual reality games for teenagers and what they are teaching them about society. Particularly when you consider what earning this virtual money means.

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Miss Bimbo, which targets teenage girls between the ages of 9 and 16, is very popular at the moment. This virtual reality fashion game is about becoming “the most famous, beautiful, talented, independent and charming bimbo across the globe”. And you do this by making your virtual character diet, binge eat, have breast implants and, most importantly, encouraging her to marry a rich boyfriend. So much for women’s lib. This game has provoked outrage as some have argued that it promotes an appearance-obsessed anorexic youth.

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What makes this an effective and potentially harmful game is how it uses virtual money to drive home messages about women in society. Virtual money is used in the game to buy the necessary diet pills and have the surgery needed to maintain the ideal body. The creators of the game claim that this is an accurate reflection of how women in society are spending their money. Really? They must know something I don’t.

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You get a limited amount of virtual money when you sign up for this game. But it’s easy enough to get more. This can be done by sending a $3 text message; finding a job in-game or finding you a virtual-reality sugar daddy. The game revolves around earning virtual money so as to ensure your character remains emaciated. The site says :

Bimbo dollars is ‘the cabbage,’ ‘bread,’ the ‘mula’ you’ll need to buy nice things and to get by in bimbo world. To earn some bimbo cash you will have to (gasp) work or find a boyfriend to be your sugar daddy and hook you up with a phat expense account!

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And how do you earn bimbo bucks ? It’s quite simple really :

  • You can complete an in-game bimbo task. These include things like having plastic surgery or maintaining your character’s target weight with diet pills
  • You could marry your rich charming boyfriend
  • You could send an sms or use PayPal—-

This game may be training a new generation of consumers who may earn real money only to spend most of it on diet products. After all, how can we be certain of the effects of such virtual earning?