Christine Kim, a Harvard legal scholar and law professor at Yeshiva University, recently published a paper detailing arguments for not only taxing the metaverse but also treating it as“a laboratory for experimenting with cutting-edge policy.

Kim argues in his paper, titled“Taxing the Metaverse,” that the metaverse enables participants to create and accumulate wealth solely within its ecosystem.

According to Kim, the tax legislation should regulate this burgeoning wealth sector. He said:

The paper goes on to explain that the metaverse’s ability to“record all digital activity and track individual wealth” means that governments can track and tax income promptly upon receipt, which Kim believes could disrupt the staquo of United States tax law.

Kim also suggests alterations to how taxes are collected. According to the research, metaverse users in the United States are currently taxed only upon realization or participation in a taxable event, such as a withdrawal.

Under Kim’s proposals, gains,“including unrealized gains and income,” would be taxed promptly upon receipt, even if they remain in the metaverse. In such a case, enforcement would be the most pressing concern.

Kim writes that there are two plausible means of tax law enforcemen t in the metaverse. Individual platforms would be responsible for withholding taxes on behalf of consumers.

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The second, which Kim deems less desirable, is known as residence taxation and would involve platforms transmitting tax information to users, who would then file and pay their taxes.

In addition, the paper argues that taxation of the metaverse presents additional opportunities for legislators, including those who would not ordinarily be interested in Web3 and metaverse technology.

“The metaverse can serve as an experimental laboratory,” writes Kim, adding that it“has the potential to simulate scenarios that are extremely unlikely to occur in the real world.