The highest South Korean court has ruled that "virtual" money can be exchanged for "real" money (as long as the "virtual" money isn't the result of gambling).
(I use quotes because the distinction between "virtual" and "real" money is a psychological artifact and has no substantial meaning. Isk issued by Eve Online developer CCP are no different in character from gift certificates issued by Wal-Mart or dollar bills issued by the Federal Reserve.)
As reported in the Korea Times, the ruling came when the court acquitted two gamers who had been indicted for selling 234 million Won (around US$206000) worth of “Aden”, the cyber money used in the online game Lineage. Aden can be used to buy in-game accessories, weapons, and so on to enhance a player’s character in the game. The newspaper reports that the two gamers traded the money at an exchange rate of about 1 million Aden for 8000 Won. ...
The ruling only applies in South Korea, but its effects may be felt well beyond that country’s borders. Industry observers are expecting the decision to stimulate the online gaming market – as well as the associated markets that surround the gaming market. And cyber money is big business. The Korea Game Development and Promotion Institute says that more than 830 billion Won (US$732 million) worth of cyber money was exchanged online in South Korea in 2006, and that amount might have exceeded 1 trillion Won (US$882 million)in 2008. With so much currency flying around, it is no wonder that South Korean courts have also ruled that the proceeds from trading cyber money are subject to a 10 percent value added tax (VAT).
I see no reason why virtual earnings shouldn't be taxed at some point, and I'd rather that point be when/if it is exchanged for "real" money than when it is earned or spent in-game.