I find this fascinating and am reminded of how the U.S government, in the
1860s and 70s wanted to drive out bank-notes issued by state chartered
banks and encourage people to begin using the new national notes issued by
Federally chartered banks. The government ultimately achieved this goal
by placing a tax on state bank notes. Or, as Justice Marshall wrote in
McCullough v Maryland, "the power to tax involves the power to destroy."

stm

Stephen T. Middlebrook
Senior Counsel
Treasury / FMS

http://tmt.interfaxchina.com/news/867

China to levy personal income tax on virtual money trading
by Hua Jinglei
Shanghai. October 30. INTERFAX-CHINA - China will levy personal income
taxes on video game players who earn real money by selling virtual money
from online worlds, China's State Administration of Taxation announced on
Oct. 29.
Income that results from the sale of virtual money will be classified as
"income from property transfer" and will be subject to a tax rate of 20
percent, according to the announcement.
The move indicates that Chinese authorities have given up attempts to ban
virtual money trading. Despite the launch of guidelines earlier this year
recommending that the practice be banned, a large market for virtual items
remains in the country, involving virtual money and property.
Transactions involving virtual money not only take place online, in the
context of a game, but also offline, when buyers and sellers meet in real
life to exchange virtual money for real money. According to previous media
reports, some traders earn income in excess of RMB 10,000 ($1,466) per
month by trading virtual items.
"The policy will not be as effective as the government expects," Chen
Shaoying, a taxation law professor with the East China University of
Political Science and Law, told Interfax. "It will be very hard for the
tax authority to detect such transactions between individuals."
In a similar move, China's Ministry of Culture said earlier this week that
it would publish guidelines for online gaming companies aimed at curbing
the sale of virtual property within online games.
Tencent.com issues the most popular virtual money in China, online credits
called "QQ coins."

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