Why PH Govt Taxing Axie Infinity Players Can Be A Good Thing

Let’s analysed and stay on facts.

Before you read the article, I would like to put a disclaimer that I am not a Financial Advisor, and the information below is based entirely on my research. I highly suggest seeking advice from a licensed Financial Advisor.

One thing I’ve learned growing up, which sometimes I find hard to do is not to react quickly on the news, but to learn on how to develop a systematic approach on change.

Axie Infinity play-to-earn game has made a significant impact on Filipinos. This is the first time in history that they earn more than the salary bracket in the Philippines just by playing a game.

On 24 August 2021, the Bureau of Internal Revenue (BIR) of the Philippines announced that Axie Infinity players need to register and pay taxes.

As defined by the BIR,

Income Tax is a tax on a person’s income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code), as amended, less the deductions if any, authorized for such types of income, by the Tax Code, as amended, or other special laws.

I felt sad when I saw the news online. Here we are - trying to find ways to financially survive while we are under a country’s community quarantine during this pandemic. It also surprised me because Non-Fungible Token (NFT) games are under the cryptocurrency and blockchain ecosystem. It is decentralised, and any government does not own it.

There’s so much FUD going on in the cryptosphere, and this FUD is an inevitable one.

Then it hit me that we are changing our cryptocurrency to fiat money, and somehow it made sense. Any income is susceptible to tax — this is the government law not only applicable in the Philippines, and we need to RESPECT that.

Somehow, I still want to find out if this is a good thing based on facts.

Here are my findings:

  1. Axie Infinity play-to-earn games are WELCOME in the Philippines. The government sees that Filipinos are earning from it, and they are not trying to ban the game.
  2. Sky Mavis, the creator of Axie Infinity, is a company that is not based in the Philippines. AI is not registered under Securities and Exchange Commissions; however, the developers of Axie Infinity are willing to work with the governments for their community members to abide by the laws.

3. SLP earnings are not fixed. The SLP earnings are based on the traded value, so we cannot assume that we earn the same bracket every month.

4. Non-resident citizens who are not residing in the Philippines are exempted from the income tax. These are the OFW’s and legal residents that are living outside the Philippines. However, it doesn’t mean that they are exempted from paying tax where they currently reside.

5. The income tax is not expensive if we are going to use the graduated table (this is different from the special 8% tax). However, my research is subjective as I’ve mentioned that I’m not a licensed Financial Advisor.

Here is the sample computation based on my research:

Assuming that 1 SLP = 7 PHP and a single-player does the daily quota of 75 SLP per day or 2,250 SLP per month. Let’s focus on this player as neither a scholar nor a manager. He is an individual income earner, and he invested in one AI team.

Remember this Formula:

SLP x PHP x 12 months = total annual income less Deductable Expenses x Income Taxed Based on Graduated Table x 1% Percentage Tax

As a non-financial advisor, I'm not too fond of computations. So, let’s make this simple by putting some financial definitions:

  1. Twelve months — taxable period.
  2. Deductible Expenses

a. Itemized Deductions- are your direct expenses. This includes your electricity expense, equipment expense (laptop/phone) that you use to play Axie, and internet expense. All itemized deductions should be submitted with an official receipt/supporting documents (i.e. — internet bill) but all expenses should be UNDER YOUR NAME. It cannot be under your parents' or relatives' names.

b. Optional Standard Deduction (OSD) — is 40% of your gross sales or receipts. This can be used if you cannot supplement your itemized deductions with receipts. 40% is the general percentage of the deduction. (We can use this deduction if for example your internet bill is not under your name.)

3. Graduated Income Tax Rates

The Tax Reform for Acceleration and Inclusion Law (TRAIN Law), officially designated as Republic Act №10963, is the initial package (CTRP) signed into law by President Rodrigo Duterte on December 19, 2017.

Citation: Republic Act №10963

4. 1% tax — Percentage tax under CREATE law

Before implementing CREATE law, the percentage tax rate is three percent (3%) of gross sales or gross receipts. However, due to create law in 2020, the percentage reduces from 3% to one percentage (1%) tax rate.

Let’s assume we are going to use the graduated income tax rate.

2,250 x 7 x 12 months = PHP 189,000

Based on the sample computation sheet, Php 1,890 is not that expensive to pay yearly. Remember that the above computation is just an example and is susceptible to change based on your actual earnings.

Final thoughts:

The computation above is subjective as we still need to wait for the BIR to provide us with comprehensive information if AI players will have to use the self-employed computation. My suggestion is to seek out a professional license Financial Advisor to be able to assist you on how to properly execute AI taxes.

Do you still think this Axie Infinity taxation is still a bad idea? Let me know your thoughts.

--

--

Life Begins at 40

Love podcasts or audiobooks? Learn on the go with our new app.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store