Harvard academics argue that the government could quickly impose a tax on income earned in the Metaverse, benefiting government revenues.
Christine Kim declares that not taxing the Metaverse will lead to the creation of a “tax haven”.
A recent research paper by law professor Christine Kim emphasizes that the government must immediately: impose Tax Metaverse income and prioritize it over other sources of income. However, Metaverse income is often received in cryptocurrencies, which only adds to the ongoing tax debate.
Recent data It shows that spending in the metaverse has exceeded $120 billion. Further research predicts that the global market value will reach $800 billion by 2024.
Kim argues that instant payments made by individuals in the Metaverse through real estate transactions, games, event hosting, etc. could offer advantages in terms of increasing the liquidity of the country’s revenues.
“The Metaverse’s ability to record all digital activity and track personal wealth can offer governments a unique opportunity to tax income as soon as it is received,” Kim noted, adding that the Metaverse It said it would provide the government with an opportunity to “modernize the tax system.”
“Immediate taxation, such as a mark-to-market system, would be a more efficient and equitable approach, as long as the inherent valuation and liquidity issues can be overcome.”
according to According to CoinMarketCap, Internet Computer (ICP) is the largest Metaverse token by market capitalization ($1.45 billion). Current price at time of publication is $3.28.
U.S. Government Virtual Currency Tax Trends
Kim points out that the US government relies primarily on taxes for revenue.According to the U.S. Treasury Department, the U.S. collected $4.9 trillion in tax revenue, primarily from personal income taxes.
She further argues that income earned in the Metaverse should be subject to Haig Simmons’ income theory. This theory means that all income should be subject to tax jurisdiction regardless of its source.
“an increase or increase in wealth over a specified period of time, whether spent on consumption or on savings.”
On August 25, the U.S. Treasury Department and the Internal Revenue Service (IRS) released proposed regulations on the sale and exchange of digital assets by brokers. The regulation, like any other security or financial investment, was enacted to avoid taxes and crack down on brokers who adhered to more reporting obligations.
The proposed rule is open for public comment until October 30.
On March 21, the IRS asked the public for their views on how to tax non-fungible tokens (NFTs). They specifically sought to determine whether NFTs should be classified as “collectibles.” This could result in long-term investors being subject to a higher tax rate of 28% compared to the standard 20%.
However, the consultation period ended in June and no further announcements have been made on the issue.
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