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Friday, January 29, 2021
Gamer culture and money
There have been several stories in the past weeks about what happens when gamer culture encounters financial concepts. One was the story of GameStop, where people on Reddit banded together to buy shares of the company, triggering large losses of several hedge funds who had shorted the company. Another was an uproar around Kickstarter, where value added tax is now more often charged. What is common between the stories is that gamers frequently reported about these money stories as if they were discussing game balance. The term "fairness" was bandied around a lot. Sorry, guys, but unfortunately money has very little to do with fairness.
The GameStop story is most certainly exaggerated. It was not as if all of Wall Street was trying to short the stock, and only small investors on Reddit staged some sort of David vs. Goliath fight and won. The exact same sort of "short squeeze" already happened a few years ago with Volkswagen, without any known participation by Reddit. And if you look closer, you will find similar stories, for example an event last year where the price of a barrel of oil dropped to negative 40 dollars. You can't explain negative prices for goods or share prices becoming completely disconnected from the value of the underlying company without understanding how people legally trade in barrels of oil or shares that don't actually exist.
What happened with GameStop was that the people who shorted the stock did it at such a scale, that they effectively borrowed more GameStop shares than were actually in circulation. That information became known, and from there it is a very easy and obvious step to just buy those shares and be certain that the people who borrowed shares need to buy them from you at an inflated price later. In other words, the financial transaction wasn't all that different from scalping PS5 or Xbox consoles. And some people on Wall Street were certainly also on the buying side, and were happy to let the discussion be about Reddit. A better discussion would be the financial regulation of shorting stocks, and whether the ability to borrow stocks should be somehow linked to those stocks actually existing in order to avoid the craziness.
The Kickstarter VAT story is at its core a story about tax evasion of e-commerce. Basically for some time Kickstarter was able to keep up the illusion that people were not pre-ordering things on Kickstarter. No, they pretended, people were donating money to a company in order to make a game happen, and then that company donated the game to the people who had donated the money. Yeah, and I am donating my time to my employer, and he is donating money to me, so neither of us should be paying taxes, right? It was always obvious that this flimsy story wouldn't hold up long once the tax authorities realized what was going on. Tax evasion by e-commerce is a big issue these days, and authorities are closing loopholes left and right. That is true for European VAT as well as for US state sales taxes, albeit at different speeds.
The problem with Kickstarter is that it is effectively a very long time pre-order. I've had Kickstarter games delivered 2 years after I paid for them. So a lot of Kickstarter projects thought that VAT was not a thing when they collected their money, and now find that it is a thing when they are trying to ship their product. But in many cases there still isn't any sales tax for American customers, and US sales taxes are comparatively low, while in the EU VAT is around 20% (in detail it is very confusing, as the rate varies from country to country in the EU, and some countries temporarily lowered VAT in 2020 to prop up the economy). So depending on your point of view (which is probably linked to where you live), it is either unfair that Europeans should pay 20% more for a Kickstarter game than Americans, or it is unfair that they both should pay the same, with the company making more money from Americans than from Europeans. Whatever solution the game company chooses, charging or not charging VAT, somebody is going to be unhappy.
Even gamers should realize that it is perfectly normal that the same game does not cost the same in different countries. There is a whole grey market for Steam keys that have been sold cheaper in Russia and then get sold back to countries in which the game costs more. If you wanted to discuss fairness, you would need to ask whether it is fair that living standards in Russia are lower than those in the USA, and if yes, whether it would be fair to sell goods at the same absolute price, which would make the games in Russia a lot more expensive compared to average income. It is pretty obvious that these discussions about fairness don't lead anywhere. Game design, which should have balance and fairness, only regulates Monopoly money. As soon as we are talking real money, these gamer arguments don't count for much anymore.
- posted by Tobold @ 11:55 AM Permanent Link
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I always find funny when "gamers" make some big discovery that blows up in those circles that is essentially just a mundane fact to most other people. Look at stuff like crunch discussions as another example.
You are absolutely correct about Wall Street jumping into the GME thing. In fact it's now been revealed that one of the main guys in the WSB sub, u/Deepfuckingvalue who has made millions from the stock exploding, is a 30something Wall Street broker. This is the guy that convinced a lot of redditors to buy as well by posting his gains.
You are absolutely correct about Wall Street jumping into the GME thing. In fact it's now been revealed that one of the main guys in the WSB sub, u/Deepfuckingvalue who has made millions from the stock exploding, is a 30something Wall Street broker. This is the guy that convinced a lot of redditors to buy as well by posting his gains.
Are we seriously suggesting wall street brokers aren't also gamers? I'd have thought it was a given most of them would be.
For me a Kickstarter project is still a crowdfunding development and not a preorder. I've had at least 4 kickstarters in the last few years that didnt deliver and never did refund because the money was spent trying to make their products. So i would pay tax on stuff i'll never get ? Taxes are on services and products, not investment.
Charging taxes once the project is ready to ship, thats another matter and i have no problem with it.
Charging taxes once the project is ready to ship, thats another matter and i have no problem with it.
While I would assume most gamers would have cheered at the sight - or at least appearance - of little guys on Reddit sticking it to the Man, I doubt the emotion is unique to gamers.
VAT on Kickstarter is a tricky issue. I have seen people say that Kickstarter is not a pre-order in the past, but this was always pointing out that backers are not guaranteed to receive anything.
The very nature of the tax will be a problem for Kickstarter, because I am certain backers want to pay up front and then at some point get or not get a box in the mail, not another bill first. Yet if you charge VAT in advance and the project isn't delivered, the VAT should not be due either (I think). The idea occurred to me that Kickstarter themselves could hold it in escrow - but that would mean they'd have to have a time limit on projects, which they don't currently. Charging tax up front seems like the only practical option, but it will certainly hurt sales to Europe. And I'm not sure it will be easier to get more money from backers than you would have before, even if that money now includes tax.
VAT on Kickstarter is a tricky issue. I have seen people say that Kickstarter is not a pre-order in the past, but this was always pointing out that backers are not guaranteed to receive anything.
The very nature of the tax will be a problem for Kickstarter, because I am certain backers want to pay up front and then at some point get or not get a box in the mail, not another bill first. Yet if you charge VAT in advance and the project isn't delivered, the VAT should not be due either (I think). The idea occurred to me that Kickstarter themselves could hold it in escrow - but that would mean they'd have to have a time limit on projects, which they don't currently. Charging tax up front seems like the only practical option, but it will certainly hurt sales to Europe. And I'm not sure it will be easier to get more money from backers than you would have before, even if that money now includes tax.
I've had Kickstarter projects where the shipping cost were paid when the game was ready for delivery, so at that time the VAT could also be charged.
I was part of a kickstarter creating rpg dices early 2020 that did the same, charging shipping at a later date. Paying taxes at the same time than shipping seems more logical to me. It also "lessen the blow" to pay the taxe (15% in Canada) a few months after investing cash in a kickstarter :)
The issue with kickstarter is that it very much isn't a pre-order. It's a bet, and up to half the time you are going to get absolutely nothing out of a project you back. Having paid tax on top of that would be a huge kick in the jimmy to me.
When you buy most goods and services, it's pretty easy to get your money back if you don't get what you pay for. It's built into kickstarter that your money is just gone if the project falls apart. The only way taxing it would make sense to me is if kickstarter itself had to refund your money if a project fails to deliver. And that would obviously bankrupt the company.
That said, tax on delivery would be more reasonable.
When you buy most goods and services, it's pretty easy to get your money back if you don't get what you pay for. It's built into kickstarter that your money is just gone if the project falls apart. The only way taxing it would make sense to me is if kickstarter itself had to refund your money if a project fails to deliver. And that would obviously bankrupt the company.
That said, tax on delivery would be more reasonable.
How will these governments also take into account that for product purchases, you cannot bill the credit card until you are shipping the product.
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