Taxation Law and the Sharing Economy

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Introduction:
The business model of sharing economy has given rise to wide range of economic,
communal and legal issues. With the growth of sharing economy in size it continues to gain
market share and simultaneously contributes to the government pressure to address and
understand the issue, so that it redresses the emerging distortions by sustaining positive
innovation (Huckle et al., 2016). One of the main concern of this essay is whether the sharing
economy is sufficiently captured for taxation purpose. The present viewpoint is that there is
presently an insufficient regulation relating to sharing economy that is exacerbated by the
poor visibility of under-collection of tax from the vendors that are using the platform of
sharing economy. There is also a poor visibility of tax breaks for sharing economy which
results in unfair competitive advantage over the counterparts under the more sternly
controlled customary segments.
Sharing economy does not have any universally accepted definition and numerous
expressions are used to refer the activity such as collaborative economy or gig economy. The
essay is mainly focussed on market operators such as Uber, AirBnB, completers of Airtasker
chores and Deliveroo drivers. These participants provide their service without forming any
kind of formal contract arrangement with their clients.
Current arrangements and promoting compliance with Australian income tax laws:
In the recent article published by the published by the taskforce gig economy
operators such as Uber, AirBnB and Airtaskers have stated that they are consulting with the
federal government regarding how they can comply with the newer reporting regimes that is
considered as the clampdown on the people that are evading their taxes by under-reporting
their income (Kenney & Zysman, 2016). According to the treasury paper release it is
suggested that the sharing economy platforms such as Uber, AirBnB and Airtaskers would be

2TAXATION LAW
subjected to newer reporting regimes. This will help in making sure that the ATO has higher
amount of visibility and the Australians are declaring their correct income from the activities
of Uber driving, renting out the room on AirBnB, finishing up a task in Airtasker or
delivering pizza through Deliveroo.
There is less amount of transparency in sharing economy relating to taxation matters.
This results the ATO to face difficulty in understanding that whether the sellers are under-
declaring their earnings, either intentionally or due to insufficient awareness. The inadequate
awareness has often been cited as the main reason for causing problems (Stemler, 2016). The
reason for inadequate awareness is largely due to fact that sellers does not work under the
customary employee-employer relationship and simultaneously falls out present reporting
systems. As a result, tax may not be withheld from income which produced on the platforms
and no obligation of reporting the payment to ATO arises (ABC News, 2019).
The informal structure of sharing economy makes it less probable for users to
understand how the platform activities may create tax distortions. The sellers may incorrectly
view that income from sharing economy platform activities are non-taxable (Oh & Moon,
2016). They may perceive the income as hobby or may view that they are using the platform
of sharing economy for producing short-term income which is non-taxable. Sellers often face
difficulty when the platform operators does not understand their responsibility.
To promote compliance in sharing economy ATO has limited the information relating
to the seller’s income (Wu & Zhi, 2016). Simultaneously, it may help in formalizing or
bringing the formal sector, activities and business that were previously conducted under the
formal sector due to activities and income can presently be reported and hence making it
easier for the tax administrators to promote compliance with the taxation rules.