I’m not much of an economist; I’ve taken a class, sure, but that doesn’t put me into a position to really understand anything more than the basics. Even just armed with the basics, however, I can clearly see that there is something very wrong with the Gem transfer tax.
ArenaNet sells gems. Their goal is to earn the most total profit from the sale of gems as is reasonably possible (i.e. without harming their brand); I think that is fairly evident and normal and to be expected.
Players (consumers) buy gems. They buy them sometimes to use in the gem store, but also to sell them to other players. So here we have two markets: one where ArenaNet sells gems to players in exchange for cash, and one where gem-owning players sell gems to non-gem-owning players in exchange for gold.
A trade of gems and gold between players currently has a massive percentage sales tax. At the time of writing this, according to GW2Spidy, selling 100 gems yields 53s and 71c whereas buying 100 gems costs 74s and 34c — a 27.75% loss. If this loss were removed, the price would fall, that is true but more importantly the supply would increase. People would be more willing to sell gems to other players because they would receive an amount greater than 53s 71c — although not more than 74s 34c, at least in the current market. The equilibrium price would end up somewhere in between.
Because players are more willing to sell gems to other players, since they earn more money off that transaction, they are now more willing to purchase gems from ArenaNet with the explicit purpose of selling them to other players. Demand in this market has now increased, leading to more gems being sold to players and more cash entering ArenaNet’s pockets.
Logically speaking, following the laws of supply and demand, lessening or removing the tax on gem sales between players would directly lead to greater gem sales in the BLTC store.
So why on earth is there a tax? What good could it possibly do? All the tax does is make gems less valuable. You could argue that it affects the cross price elasticity between buying gems with gold and buying gems with cash — but that value doesn’t matter at all. All gems come from ArenaNet initially anyways. It matters not if there is a decrease in the number of people buying gems with the intent of using those gems themselves because that same change is met with an even greater increase in the number of people buying gems with the intent of selling them to other players. All gems are still bought from ArenaNet anyways, so why wouldn’t they encourage as much consumption as possible?
This just makes no sense to me. The only thing I can think of is the tax acts to protect players from other players who want to purchase gold using cash — something which is not an issue in the game at all. You can’t buy an advantage in this game, not really at least. All gold does is make it easier to reach the stat cap, something anyone can hit with a bit of effort anyways. On the other hand, removing the tax would decrease the equilibrium price of gems, making them more available to the populace, increasing the revenue of gem-sellers, making them more likely to buy further gems, therefore improving ArenaNet’s bottom line, and it even would even affect gold sales from third party merchants because the amount of gold you get from legitimate first-party purchases has now gone up. The benefits far outweigh this one antiquated protectionist concept, a concept not even applicable to GW2 thanks to how the game is set up.
I’d love to hear John Smith’s thoughts on the subject. Like I said, all I know are the basics of economics, but even with just that this just seems remarkably off. This tax is just not in anybody’s best interests; all it does is harm the game and the economy within it.
