The digital space has become an avenue for different means to earn money amidst the pandemic. In particular, the rapid growth of play-to-earn NFTs, such as Axie Infinity, in Southeast Asia is raising awareness among citizens, broadening their perspectives into new forms of investment and unconventional online jobs.
However, these trends are also ringing alarm bells for governments and regulators, who have become wary of emerging digital trends that may affect the economy.
In recent months, the Philippine government has had keen eyes on growing earnings from online sources. The Bureau of Internal Revenue (BIR) claims that money from online selling, virtual content, and at present play-to-earn and NFT games like Axie Infinity, are subject to tax. In a recent development, BIR urged players to declare their earnings and pay taxes because technically, NFT gaming is a source of income.
Most Filipino Axie players are unhappy about this news and see this move as an exploit to leech from the citizens. Some, on the other hand, regard it to be fair. The issue raised several questions circulating around tax registration, payments, and consequences for evasion.
Marissa Cabreros, BIR Deputy Commissioner for Legal Group stated in a media briefing that players can trade and convert this cryptocurrencies into cash, thus the flow of income is established and making monetized coins or trades taxable.
Players who earn an annual net income of ₱250,000.00 (around US$4,800.00) or less are exempted from tax under the Tax Reform for Acceleration and Inclusion (TRAIN) law, but players who earn more should register and pay proper taxes. At present, BIR does not have a system to trace and map all PH Axie Infinity Players, except for individuals or corporations who do live streaming on social media that can be easily identified.
The Revenue Memorandum Circular (RMC) No. 97-2021 elaborates on taxation of any income received by social media influencers including other forms of services done online. Non-compliance may result in sanctions and, at worst, imprisonment.
In addition, the Department of Finance (DOF) backs BIR, stating that gains from Axie Infinity should be reported and taxed, clarifying that purchased tokens are exempt. DOF looks forward to coming up with a system to determine and evaluate tax for non-resident foreign corporations dealing with digital goods and services.
Sky Mavis, the creator of Axie Infinity, posted a tweet regarding the ongoing issue to cooperate with governments. The Vietnamese blockchain game developer encourages its global players to abide by existing laws within their home countries, such as laws on taxation. Mavis recognizes the importance of obeying laws in empowering innovation and gaming aligned with the shift from traditional sources of income to play-to-earnp profits.
According to Mavis, their gaming studio sees this as an opportunity rather than a barrier in providing a long-term benefit for both the company and the players.