Tax in virtual worlds

Mark Simpson (pictured in Second Life), a tax planning director at Simpson Burgess Nash, has published an interesting piece on how taxes apply to businesses in virtual worlds, such as Second Life.

It might seem comic but there have been US Dollar millionaires and the US Congress is about to publish a report on how to and to what extent taxes should be applied.

It is a little complex: how do you tax capital gains tax on property if it increases in value and only exists on a server? Moreover, Second Life reserves the right not to compensate you if you lose a property because of a technical problem.

There are plenty of other issues: inheritance tax, income tax, domicile, capital allowance.

A bit of fun you might think; the Second Life economy currently generates an annual turnover of $500 million and is growing at 10-15% monthly. Simpson Burgess Nash has established a presence - marketers as well as accountants.