Welcome to our new blog series spotlighting the metaverse and what it could mean for planet VAT.
Part 1 explores the metaverse and its concepts, with Part 2 homing in on specific VAT concerns and digitalization in its broadest sense.
What is the metaverse and how will it disrupt the world as we know it?
The race to the first metaverse (amassing one billion people) is already underway for Roblox, Epic, Sandbox, Metaworx (Luxembourg), Meta (Facebook), Microsoft and Disney – no small number of household names as you can see!
The metaverse (a fusion of ‘meta’ and ‘universe’ which literally translates as ‘beyond universe’) is an immersive virtual world in which users can travel and interact with other people and their surroundings.
Today’s metaverse looks like a video game a teenager might be playing, but this is likely to change in the future. It is set to become much more sophisticated – a place where you could hold a business meeting or enjoy an enhanced online shopping experience. Leveraging massive investment in R&D, GAFAM (Google, Amazon, Facebook, Apple, Microsoft) as well as other tech companies are building ecosystems that could become the new internet, but in 3D. You don’t need much to access this new world – just a pair of augmented reality (AR) glasses and/or a virtual reality (VR) mask.
The metaverse has the potential to be more disruptive than digital transformation, e-commerce, “uberization” and even the smartphone. But why? Well, because it could change the way we surf the internet, connect, communicate, collaborate, buy, socialize, and relax. Believe it or not, the value of the metaverse is expected to be close to the GDP of India by 2030.
Let’s not get too ahead of ourselves though… Before all this becomes a (virtual) reality, metaverse companies will be up against some serious challenges.
In order to run efficiently, meta universes require significant amounts of computing power and electricity. They also need fast fiber-optic internet and bandwidth to transport us beyond our current tangible universe.
Standard setting processes when it comes to switching from one metaverse to another, data privacy issues, currency instability within the universe (think Amazon’s New World video game), and the application of taxes within these virtual universes, all need to be further researched and analyzed.
Given meta impacts real life, it begs the question: What about taxation? Would taxation apply in the virtual world as it already does in the ‘real’ world? And if so, are there any concerns around qualification of the supply for tax purposes?
The metaverse certainly won’t make life easier for tax authorities with its virtual places, events and a Web 3.0 environment which embraces cryptocurrencies, digital coins, NFTs virtual goods as well as B2B, B2C and C2C trading.
Don’t miss Part 2 of this blog series where we take a deeper dive into the VAT conundrum!
Any questions in the meantime? Reach out to KPMG Luxembourg’s Indirect Tax team.