China to tax income from Virtual Goods

The Wall Street Journal is reporting that China’s taxman intends to impose a 20 per cent tax on profits from virtual assets.

According to the Journal’s Juliet Ye, the move “specifically takes aim at those who buy virtual currency from gamers and surfers and sell it to others at a mark-up”. This presumably includes MMO gold farmers, and traders who buy and sell player accounts. The article also mentions that online currencies are used in instant-messaging services and web portals in China.

Gold-farming is technically illegal in China, but this hasn’t stopped the Chinese government imposing the steep levy as a personal income tax. However, the move could be interpreted as a deterrent from virtual money trading, rather than mere opportunism, as the Wall Street Journal points out.

“Statistics from research firm iResearch show that China’s virtual currency market is growing at a yearly rate of 15 per cent to 20 per cent, and several billion yuan worth of virtual money is traded in the market,” Ye said.

“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… They feared the practice could lead to inflation as well as money-laundering.”

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