Taxing the sharing economy

In 2017 the OECD asked a group (made up of the UK and Italian tax authorities) to look at how countries could ensure that income from the sharing and gig economy (such as Airbnb, Uber, Deliveroo and eBay) was taxed effectively.  The group published its recommendations yesterday.  

Research in the UK suggests that around 11% of the working age population derived some income from sharing economy activities in 2015/16.  Although the report accepts that more work needed to be done on quantifying this risk, tax authorities are clearly concerned that profits from these transactions may be escaping tax.  Whilst this might be true, it is, of course, also the case that on-platform transactions (with electronic payment and identification of parties) may be easier for tax authorities to identify than the cash-in-hand physical economy.

Although tax authorities might want to require platforms to provide them with all information relating to users in the tax authority’s jurisdiction, or even get the platform to collect tax on its behalf, this is not easy to enforce when the platform may not have any physical presence in the relevant country. The report also accepts that any reporting requirement needs to be standardised between countries to avoid placing an unreasonable administrative burden on platforms.

The report’s recommendations therefore include platforms being encouraged to sign up to a voluntary “code of conduct” under which they would:  

• provide its users with information about their tax liabilities, to improve understanding among platform sellers of their tax obligations; and
• agree to improve their user "on-boarding" procedures, so that the platform can identify users and provide information on users and their transactions to the tax authority where the platform is located – with that tax authority then sharing the information with the relevant tax authority for each user.

The challenge, of course, will be getting platforms to agree to sign up to any of this.  It is likely that public opinion will have a role to play here.