China Levies 20% Tax on Virtual Currencies

China announced a 20% tax on income generated from income made in trading virtual currencies last week. The move comes after an attempt two years ago to simply ban users from profiting off of virtual trades, but observers, both analysts and users, are skeptical about whether or not the country can enforce the new ruling, reports the Financial Times. According to the WSJ, 70% of voters in a survey opposed the new ruling, but the government is moving forward with its plans. The announcement [Google translation] was distributed to local tax bureaus, asking them to determine the original prices of currency and virtual goods where users fail to do so.

According to reports, the change comes due to both an increase in the value of the market, currently estimated at about $1.45 billion and growing at 15-20% each year, as well as concerns over the use of virtual currencies in money laundering. Just last week, for example, a Korean group was arrested after laundering $38 million over 18 months back into China from virtual currencies. China isn't the first nation to begin taxing virtual currencies: Korea launched a value added tax last year, and Sweden has been rolling out its tax plan over the last year as well. [via PlayNoEvil]