US Government probes economic activity in Second Life

The US Government will investigate the amount of trade being carried out in online fantasy games such as Second Life, prompting fears amongst some gamers that it will tax virtual trading.

The Joint Economic Committee of the US Congress will investigate the scale of commerce taking place in games such as Eve Online and Second Life. Though the Committee said that it does not intend to start taxing trade it did say that it wants to get an idea of where the line falls between taxable and non-taxable trade.

The fantasy games involve recreations of many normal activities, and trade is a huge part of that life. Currency in some of the worlds is bought for actual money and can be reconverted, which means that in-game trades have quantifiable economic value outside of the game.

In other cases attributes and in-game gold are won through game play and sold for hard cash outside of the games. Reports have emerged of 'gold farmers' in China who play the game for a living.

"Clearly, virtual economies represent an area where technology has outpaced the law," said the JEC statement announcing its investigation. "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."

The BBC reports that some studies have shown that the amount of time spent on playing the games and creating online wealth have created in-game economies equivalent in size to the GDP of Namibia.

The JEC's senior economist Dan Miller said that the investigation was at an early stage. "You could argue that to a certain degree the law has fallen behind because you can have a virtual asset and virtual capital gains, but there's no mechanism by which you're taxed on this stuff," he told the Reuters news agency.

Increasing amounts of real-world economic activity is also taking place in the games. Computing giant Sun recently held a press conference inside the game Second Life. The company opened a 'pavilion' in which programmers within the game could try out software. News agency Reuters recently announced that it was employing a full-time Second Life reporter to write stories only on life within the game.