Virtual economy tax ‘would be a mistake’

From Reuters:

By Adam Reuters

SECOND LIFE, Oct 18 (Reuters) - The head of a U.S. congressional committee said it “would be a mistake” if the Internal Revenue Service introduced regulations to tax virtual economies such as Second Life and World of Warcraft.

Rep. Jim Saxton (R-NJ), chairman of the Joint Economic Committee, confirmed an earlier Reuters report that the committee was studying the public policy and tax issues related to virtual economies.

“There is a concern that the IRS might step forward with regulations that start taxing transactions that occur within virtual economies. This, I believe, would be a mistake,” Saxton said in a statement released on Tuesday.

“Clearly, virtual economies represent an area where technology has outpaced the law. The goal of the forthcoming JEC study is to help lawmakers understand the issues involved and head off any premature attempt to impose a tax on virtual economies,” he said.

Saxton added that under current law, if a transaction takes place solely within a virtual world there is no “taxable event.”

Dan Miller, chief economist for the Joint Economic Committee, told Reuters earlier this week that the committee’s study would start “with a blank slate” and be completed by the end of the year.

Saxton is running for re-election against the similarly-named Democratic challenger Jim Sexton. The incumbent’s motto, seen on bumper stickers and lawn signs, is “Jim Saxton gets an ‘A.’”