Failure to tax the metaverse ‘will create a tax haven’ — Harvard legal expert

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    Christine Kim, a law scholar at Harvard University and a law professor at Yeshiva University, recently discussed not only taxing the Metaverse, but also treating it as a “laboratory for experimenting with cutting-edge policies.” A detailed research paper was published.

    In the paper, simply titled “Taxing the Metaverse,” Kim claim The Metaverse allows participants to create and build wealth entirely within its ecosystem.

    According to Kim, this burgeoning wealth sector should be regulated under tax law.

    “Economic activity within the Metaverse meets the Haig Simons and Glenshaw-Glass definition of income, so removing it creates a tax haven.”

    The paper goes on to explain that the Metaverse’s ability to “record all digital activity and track personal wealth” means that governments can track and tax income as soon as it is received. This could shake the status quo of US tax law, Kim said.

    Related: New Taxes on US Cryptocurrencies: Laws Deciphered

    Kim also recommends changes in how taxes are realized. In this regard, research has shown that US Metaverse his users will now only be taxed if they realize or engage in taxable events such as withdrawals.

    Kim’s proposal would trigger taxation as soon as profits “including unrealized gains and income” are received, even if they remain in the Metaverse.

    In such cases, the more pressing issue would be enforcement. Kim writes that he has two plausible ways to enforce tax laws in the Metaverse. First, individual platforms withhold tax on behalf of users.

    The second, which Kim says is less desirable, is called inhabitant tax, which relies on platforms sending tax information to users, who then declare and pay their own tax liability. Masu.

    The paper also argues that taxing the Metaverse will create additional opportunities for lawmakers who are not normally interested in Web3 or Metaverse technology.

    “The Metaverse could be a laboratory for experimentation,” Kim wrote, adding that “it could simulate scenarios that would be unlikely in the physical world.”

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