Austaxpolicy blog

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Sharing the burden: taxation of the peer-to-peer economy
by Aqib Aslam and Alpa Shah, 8 February 2018

Within less than a decade, companies such as Uber, Airbnb, and TaskRabbit have become an integral part of the personal and social experience globally. Services that previously appeared impossible to organize beyond the community level have instead become almost impossible to do without. In this way, peer-to-peer (P2P) activities have seeped their way into everyday functions and therefore the psyche of the consumer. However, as the digital P2P economy continues its commercial ascent, it has come under increasing scrutiny amid the perception that it is far less regulated than traditional businesses operating in the same sector. Certain sectors such as accommodation rental and ride-sharing bear the brunt of such criticism. While some argue that putting beneficial pressure on restrictive practices is enhancing efficiency, others view a light government touch as distorting competition and giving individuals and businesses in the P2P economy an unfair advantage. In the price-setting ride-sharing industry, the question of whether drivers are employees or self-employed has been another source of controversy. Inevitably, questions have also been raised whether P2P platforms in the hospitality and tourism sectors are somehow tax-advantaged compared with traditional businesses, violating the principle of tax neutrality. If P2P economy users are indeed subject to lower taxation – because of preferential rates or simply underreporting of income – government tax revenues may also be at risk, especially if other, more tax-rich activities are being displaced. Yet digital platforms could also be helping to formalize activities in certain sectors, such as household cleaning services, bringing them within reach of the regulatory and tax authorities. It is worth pointing out, however, that the P2P model – the transaction of goods and services between individual buyers and sellers – is not a new way of conducting business (think of bartering).

Read the full article at Austaxpolicy blog.

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