Kim believes that Metaverse can also serve as a policy testing ground for scenarios that are unattainable in real life.
Christine Kim, a Harvard and Yeshiva University legal scholar, recently published research outlining the urgent need for taxing economic activities in the Metaverse. She suggests that the new digital frontier can be an experimental ground for innovative tax policies.
In her paper titled "Taxing the Metaverse," Kim highlights that the Metaverse offers a unique platform for users to generate and accumulate wealth solely within its digital confines.
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Therefore, she warns that if left untaxed, the Metaverse could become a "tax haven," adding that its activities meet both the Haig-Simons and Glenshaw Glass income definitions.
Kim notes that the Metaverse's digital record-keeping capabilities present an opportunity for immediate income taxation as it's generated, potentially challenging existing US tax laws.
Under current guidelines, individuals in the United States are taxed only upon realization of income or when engaging in a taxable event like making a withdrawal. However, Kim’s recommendations would see taxation occurring instantaneously upon receipt of gains, even if they are unrealized and remain within the Metaverse's ecosystem.
When it comes to enforcing these proposed tax policies, Kim sees two main approaches. One method would involve platforms themselves withholding taxes for users. The other option is "residence taxation," where platforms would provide users with tax information, requiring them to file and pay their taxes themselves.
Beyond tax collection, Kim indicates that the Metaverse can serve as a policy experiment ground. She mentions that this digital world could simulate scenarios that are unattainable in real life, giving lawmakers new avenues to explore and leverage for policy innovation.
According to Harvard legal scholar Christine Kim, failing to introduce tax regulations in the Metaverse risks creating a digital "tax haven." Thus, demands immediate taxation of gains within this burgeoning virtual world and suggests possible enforcement methods.
