European Commission calls for ‘level playing field’ on sharing economy tax

The European Commission has issued guidance urging member states to ensure their taxation and regulatory regimes support the growth of the ‘collaborative’ or ‘sharing’ economy such as Airbnb and Uber, and indicated that new online platforms may also help cut the costs and effort required for tax administration

The Commission’s report says new business models such as Uber and Airbnb can make an important contribution to jobs and growth in the EU, ‘if encouraged and developed in a responsible manner’, but warns that national authorities are responding with ‘a patchwork of different regulatory actions.’ It estimates gross revenue in the EU from collaborative platforms and providers amounted to €28bn (£22bn) in 2015, with some forecasts suggesting the sharing economy could add €160bn to €572bn to the EU economy in future years.

However, the Commission warns that the current fragmented approach to this sector is creating uncertainty, and says its guidance is intended to ensure a level playing field between traditional operators and new sharing economy models.

Commissioner Elzbieta Bienkowska, responsible for internal market, industry, entrepreneurship and SMEs, said: ‘The collaborative economy is an opportunity for consumers, entrepreneurs and businesses – provided we get it right. If we allow our single market to be fragmented along national or even local lines, Europe as a whole risks losing out. Today we are providing legal guidance for public authorities and market operators for the balanced and sustainable development of these new business models.’

The guidance states that absolute bans of an activity should only be a measure of last resort. Platforms should not be subject to authorisations or licenses where they only act as intermediaries between consumers and those offering the actual service (e.g. transport or accommodation service). Member states should also differentiate between individual citizens providing services on an occasional basis and providers acting in a professional capacity, for example by establishing thresholds based on the level of activity.

However, the Commission says that issues have emerged in relation to tax compliance and enforcement, which include difficulties in identifying the taxpayers and the taxable income, lack of information on service providers, aggressive corporate tax planning exacerbated in the digital sector, differences in tax practices across the EU and insufficient exchange of information.

It states: ‘In this regard, member states should aim at proportionate obligations and a level playing field. They should apply functionally similar tax obligations to businesses providing comparable services. Raising awareness on tax obligations, making tax administrators aware of collaborative business models, issuing guidance, and increasing transparency through online information can all be tools for unlocking the potential of the collaborative economy.’

The Commission also states that the collaborative economy has created new opportunities to help tax authorities and taxpayers with their tax obligations, largely because of the increased traceability afforded by the use of online platforms.

The report says: ‘To this end, an efficient exchange of tax-related information amongst platforms, authorities and service providers can help reducing costs. The creation of one-stop shops and the development of online feedback mechanisms can also create new possibilities for partnerships and compliance monitoring.’

However, the Commission says that the different approaches by national tax authorities toward the treatment of platforms can increase the administrative burden on collaborative activities, and wants to see the development of commonly agreed standards on information exchange and other issues. 

The Commission says that, going forward, it will monitor the changing regulatory environment as well as economic and business developments in the sharing economy, in order to identify possible obstacles and problems arising from divergent national regulations or regulatory gaps.

Robert Vaughan, PwC economist, said: 'Despite the significant progress the sharing economy has made in Europe, latest estimates suggest only 17% of consumers have participated in it, so there is plenty of potential for future growth. To encourage participation, policymakers and legislators will need to find the right balance between the rights of individuals and regional priorities for competitiveness, innovation and growth.

'The European Commission's announcement of a European Agenda for the sharing economy is a proactive first step on the journey to developing a consistent approach across the 28 member states. However, delivering it will require a flexible and collaborative mind-set from all involved, to experiment with new regulatory settings and policy innovations.'

A European agenda for the collaborative is here.

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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