Thursday, April 24, 2014 4:26am CST

China Taxes Online Game Players

December 8 2008 by Kerry Kobashi

china flag

The Chinese government wants to tax successful online video game players who accumulate virtual money and exchange that for real money according to Juliet Ye of the Wall Street Journal. But for some reason, they aren't trying hard to enforce it.

Tencent, the company that owns China's largest Internet portal QQ.COM uses virtual QQ coins to allow its regulars to play games and issues it for rewards. Users can purchase QQ coins by bank, QQ card or telephone at one Yuan per QQ coin.

The problem here is that the virtual money is being exchanged for real services like gambling, online shopping and private chats at other websites creating its own underground virtual economy.

In 2007, the Chinese government ordered all websites to stop using virtual money in trade and prohibited people from exchanging virtual money for real money - but a lot of good that has done since.

Afraid of money laundering and illegal trade, the government wants to now tax online players of their virtual money by the rate of 20% of personal income.

I can only chuckle at all of this because it was the Chinese who invented fiat currency (funny money). With the Yuan fixed to the US dollar causing the dollar's weakness, wouldn't this be quite interesting that yet another fiat currency of virtual sorts could be a threat against world currency. Given the Chinese government says they are trying to stop the use and yet taxing it on the other hand, it seems to me like they aren't trying very hard to stop it and have accepted it.

Consider that Tencent has over 850 million registered users of its Instant Messaging service. At its peak over 4 million users are on QQ.com and 44 million IM users. That's quite a bit of people that can get their hands on virtual coin. If more and more third party websites adopt the coin as a trading commodity, TenCent would be printing its own virtual money like the Treasury.

How funny is that?

About Kerry Kobashi

Kerry Kobashi picture

Kerry is the founder of KerryOnWorld. He lives in Silicon Valley.