There are those who fear the arrival of the taxman into virtual worlds. There is of course already a presence, income tax, capital gains tax, VAT, take your pick. However some of us feel they might want an even bigger slice of the cake and start looking at inworld currencies.
However I’m here to temporarily alleviate your fears, because at the moment the taxman doesn’t appear to know his arse from his elbow when it comes to virtual worlds.
In early October I started a dialogue (a slow, long, painful, dialogue) with HMRC (The UK taxman). My point being, why the heck am I paying VAT for tier on virtual world land? The problems seem to arise via laws, laws that were implemented without consideration of virtual worlds such as Second Life and inworld currencies.
We’ve exchanged emails, they’ve sent me letters and this week, they send me what they hope is a
satisfactory answer:
“I have conferred with our Unit of expertise and can advise you that our current position is that ‘transactions’ that take place entirely within a virtual world do not appear to constitute supplies for VAT purposes.”
You see what they did there? A politician would be proud of an answer like that. The key phrase is “do not appear to constitute.” This is a get out of jail free card in case they decide at some stage to change their mind, because they haven’t actually said that inworld ‘transactions’ definitely do not constitute supplies for VAT purposes.
Politicians of course give a different answer on this issue, the politicians I’ve contacted have reacted with a deafening silence, not one reply. They obviously don’t know what to make of it all and feel it’s better to pretend it never happened.
However whilst all this is going on I’m paying more than non-Europeans for my land tier and it’s quite a hefty sum and whereas that’s my fault for being born in Europe, it’s still a pain in the backside when VAT charges are completely unjustified on land tier.
However there are a couple of implications from the non answer provided. One is that those who have sent LL their VAT number to avoid VAT charges are skating on thin ice. If all your supplies are VAT exempt, you can’t avoid paying VAT for the service. As far as I’m aware LL ask for the number and then simply don’t charge those people VAT. This is fair enough as it’s not LL’s problem, but some people may be in for a rude awakening when they file their tax returns.
Another implication is, if I could pay my tier inworld, it would appear to mean that I would not have to pay VAT on my tier. Now this has other implications, maybe the L$ market would be flooded which could reduce the value of the L$.
How would LL be able to manage inworld payments anyway? I mean this would be difficult, surely they would have to reclaim 16m parcels of land, install a tier payment box and then inform everyone of the new regime. No big land owner would install such a system, would they? 😉
There are options, there are alternatives and there are ways to make life easier for us whiney Europeans but even I have to admit that the alternatives are definitely troublesome and may be ruled illegal at anytime.
In the meantime, I’m just looking for someone to save me, save me, save me, from this squeeze!