Taxation Law and the Sharing Economy

This essay discusses the impact of taxation laws on the sharing economy in Australia. It highlights the need for improved compliance and transparency in reporting. The essay explores different models for reporting by sharing economy platforms and financial institutions to ensure accurate tax compliance. It concludes by emphasizing the potential benefits of regulating the sharing economy for both the government and individuals.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
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Introduction:
During the year 2016 the black economy taskforce was introduced for evolving a
frontward eyeing, multi-range policies in reply to fight the black economy of Australia. The
black economy taskforce it its last statement has stated that the harm that it is causing to the
business and the society by imposing penalty on the honest taxpayers creates a negative effect
on the integrity of the Australia’s taxation regimes and welfare system (Allen, 2015). It is
also creating an unequal playing ground for most of the small business that are presently
discharging their liability in correct manner. This effect is currently being felt by several
businesses and customers particularly those that are in the sharing economy.
In the recent years the sharing economy has significantly reached progress. It has
simplified innovation, employment growth and wide range of choice for the clients.
Throughout the consultation the task force has stated that the development of sharing
economy also pose a significant amount of risk for the sellers as they might not be paying
correct amount of tax (Stewart & Stanford, 2017). The underpayment of tax undermines the
advantage of sharing economy to both the clients and business which ultimately creates an
uneven arena for business operators that are discharging their business obligations correctly.
An agreement has been entered into by the ATO with few platform operators to
furnish info under the present data gathering procedures. The gathering of facts under the ride
tracking sector has allowed the ATO to carry out the precautionary activities which would
help in understanding and complying with the obligations (Witt et al., 2015). However, a
more comprehensive compliance regime is needed to widely improve the compliance under
this part.

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Present arrangements and endorsing compliance with Australian income tax laws:
For sharing economy there is no such definition that is universally accepted and
understanding the scope sharing economy is regarded as the key objective of the consultation
procedure. Though it is difficult to clearly explain the example of sharing economy include
the ride sharing (Uber) or the short term accommodation services (AirBnB) which is
facilitated through the website or software application that is operated by the platform
provider. The sharing economy can also be referred as the Gig Economy where the sellers
through online mode predominantly offers services for a short term basis (Cheng, 2016). The
Australia’s sharing economy is developing speedily and it is estimated that around 10.8
million people in Australia earn extra income through sharing economy services.
Presently, there are insufficient measures of transparency and information with
respect to matters related to taxation in sharing economy. Accordingly, ATO is up with the
difficulty in understanding if sellers are understating their earnings either deliberately or for
the reason of the lack of understanding (Minifie & Wiltshire, 2016). The main problems that
is contributed to ATO tax compliance regime is the lack of awareness among the sellers in
sharing economy.
The reason for inadequate awareness among the sharing economy sellers is that sellers
might be working under the normal employer and employee relationships rather they work as
the self-governing workers or self-employed values that are not within the present rules of
reporting (Healy et al., 2017). This suggests that the tax is not withheld from the earnings that
is produced by sellers on the platforms and platforms might not have the obligation of
reporting figures to the ATO regarding the payment received. As a result, ATO has restricted
data about the profits of sharing economy sellers.

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According to the Yaraghi & Ravi, (2017) the sharing economy operators should
submit data relating to the payment that is made through the platform to the sellers that can
be used for prefilling tax returns. To promote compliance important factors such as positive
user experience should be promoted. The reporting regimes should facilitate easiness for
those that are receiving the returns from the sharing economy to fulfil the obligations of tax,
particularly the income tax and the GST through enriched information sharing and data
sharing that is gathered by ATO across all the agencies (ABC News, 2019). Additionally, it
must lower the requirement for verification among the taxpayer’s complements but does not
creates a duplicate reporting requirements and offers the potential in future for prefilling of
tax returns. Therefore, it will make it easy for the sellers to pay tax as this will help in making
them consistent with the persons that are discharging their responsibility in a correct manner.
Hamari et al., (2016) states that the reporting regimes must be catalyst for the higher
compliance where sharing economy platforms sellers have the greater awareness regarding
the taxation obligations. The reporting regimes should be such that it imposes the least
amount of costs on the targeted entities so that it can meet their reporting obligations while
still remains compatible with the government data requirement.
Braithwaite, (2017) arguably explains that the reporting regimes must not
discriminate against the platforms based on their sizes, locations or different business models.
The reporting regimes should promote the level playing ground in comparison to the
traditional business that have the current reporting requirements. To promote compliance it is
necessary to make sure that the efficient and reliable information is periodically received by
the government under the standardised layout. The reporting regimes should be such that it
provides adequate level of information to recognize the taxpayers are providing important
details of the sharing economy transaction and helps with the periodical reporting cycles in
the form of business activity statement quarterly reporting cycle.

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In light of the above discussion it is understood that ATO has very restricted
information regarding the operators working under the sharing economy. The transparency
gap where several sellers are not familiar with tax compliance and it is not the desirable
outcome (Standing et al., 2019). As Australia has the self-assessment system, having
sufficient education and guidance on tax is considered important the absence of
comprehensive reporting framework for workers poses the non-compliance risk. Cracks in
the present reporting rules cannot be treated new and often turns out to be feature of the short
term work activities between the private persons for the assets usage.
The new technologies implies that connection between sharing economy purchasers
and sellers can be easier to facilitate, often exacerbating gaps under the current reporting
regimes. Nevertheless, the new technologies and the role of platforms in the sharing economy
provides a significant amount of opportunity (Leighton, 2016). Identical to the present
reporting requirements it would enable the ATO data matching of the income that are
reported from the persons as well as business altogether with reported income from other
sources. It will help in creating opportunities for easy satisfaction of tax compliance where
pre-filling of tax returns is conceivable.
Recommended ways of improving tax obligations:
To improve the tax obligations an option of “reporting by sharing economy
platforms” can be adopted. This will help in capturing all the activities that are take through
the platform. Platform operators of the sharing economy must compulsory collect as well as
report the data to the ATO (Braithwaite et al., 2018). The data should include the vital
information regarding the identity and the income that is received by the sellers in Australia.
Some platforms might offer figures relating to transaction in the regular manner to sellers
which will help them in satisfying tax compliance requirements.

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The information that would be reported can be easily used by ATO for corresponding
and possibly pre-filing the tax returns. This will aid in decreasing the load of compliance
from the taxpayers. With respect to the matters that is defined above, the figures that is
gathered must be communicated with the other supervising agencies by the ATO (Stephany,
2015). This option would need the platform operators of the sharing economy to continually
report the figures regarding the transactions of sellers under the listed format that would also
accompany compliance framework. The rationale for implementing this choice is that present
reporting systems have had some accomplishment in promoter superior degree of tax
compliance. While the present rules of reporting such as the assessable payment reporting
arrangement and the single touch payroll under “section 353-10 of schedule 1 to TAA 1953”
are not likely to be considered suitable models for the reporting of vast data on activities of
sharing economy. So, specific regimes for sharing economy is essential.
The reporting regimes would put the platform operators under the requirement of
providing a set range of sellers identification and transaction data under the standardised
format. The platform would be under obligation of making sure that the information
furnished is accurate. This may need modifications in infrastructure and may add other cost
of compliance on the business (Gibbs et al., 2018). Changes in the requirements of reporting
from the outdated system to the periodic reporting system might provide the sharing economy
with the platform of stronger case for restructuring and mechanizing the data that is collected
and reporting the same to the ATO. As a result there will be reduction in the weight of tax
compliance on the platforms during the long run. It may also promote reduction in the cost of
compliance for the larger number of sellers operating in the sharing economy.
Another alternative model that requires reporting by the platforms operators would
involve placing the requirement to the financial organizations predominantly banks or
payment process that would provide sharing economy with the business data to ATO for data

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matching and pre-filling (Standing et al., 2019). The financial associations are already under
the obligation of reporting the ATO regarding the number of transactions for meeting the
numerous legislative requirements which includes the interest paid into the account holders
and investors. Corresponding the payments to the individuals or entity can be assisted by the
fact that several bank account holders provide their TFN number of the financial
organizations. This choice of reporting would aid in reducing the effect on sharing economy
platforms (Australian Financial Review, 2019). Adopting this option may lead to a reduction
in the cost of compliance for the sharing economy operators but the financial institutions may
incur cost. For reporting requirements on the financial organizations to be at a practical
option, it will necessary for the data relating to the source, timing and value of payments that
would be collected efficiently. Whereas some information relating to the source may be
available from the KYC and anti-money laundering rules, it is required to be obtainable under
a layout that will facilitate efficient access to the data.
One of the best way of gathering data is by requiring the sharing economy platforms
to report the data to ATO or instead provide the access to the data (Yaraghi & Ravi, 2017). It
is noteworthy to denote that the platform providers share the data on the basis of access that
is granted to share the data to ATO and does not relives the end users that generates income
from the liability of furnishing information at the time of filing tax returns. This will only
make it difficult for the taxpayers to conceal any kind of information based on the knowledge
that ATO has full access to the type of activities and the payment that is received.
Conclusion:
The essay can be concluded by stating that the sharing economy can be very much
advantageous for the government, customers and individuals because it provides greater
choice, flexibility and efficiency. Sharing can be considered both demographically neutral

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and it is shock resistant to macro-economic by offering population with the means of using
own resources to produce alternative source of earnings.
While in relation to tax, if the sharing economy is captured adequately in the tax code
it may provide new growing and sustainable source of revenue for the government. Sharing
economy will help in creating most unique source of tax compliance opportunity which is
attributable because of its digital nature. As a result of this, regulating sharing economy can
assist in changing from informal to formal sector which will secure the additional source of
revenue for government

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References:
ABC News. (2019). ATO hunts hidden income from Uber, Airbnb and other gig economy
workers. [online] Available at: https://www.abc.net.au/news/2019-01-23/ato-hunts-
australians-hiding-income-via-uber-and-airbnb/10742528 [Accessed 9 May 2019].
Allen, D. (2015). The sharing economy. Institute of Public Affairs Review: A Quarterly
Review of Politics and Public Affairs, The, 67(3), 24.
Australian Financial Review. (2019). How the tax system should change to include
Australia's sharing economy. [online] Available at:
https://www.afr.com/news/politics/how-the-tax-system-should-change-to-include-
australias-sharing-economy-20190309-h1c728 [Accessed 9 May 2019].
Braithwaite, V. (2017). Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Braithwaite, V., Reinhart, M., & Job, J. (2018). Getting on or getting by? Australians in the
cash economy. In Size, Causes and Consequences of the Underground Economy (pp.
55-69). Routledge.
Cheng, M. (2016). Current sharing economy media discourse in tourism. Annals of Tourism
Research, 60(C), 111-114.
Gibbs, C., Guttentag, D., Gretzel, U., Morton, J., & Goodwill, A. (2018). Pricing in the
sharing economy: a hedonic pricing model applied to Airbnb listings. Journal of
Travel & Tourism Marketing, 35(1), 46-56.
Hamari, J., Sjöklint, M., & Ukkonen, A. (2016). The sharing economy: Why people
participate in collaborative consumption. Journal of the association for information
science and technology, 67(9), 2047-2059.

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Healy, J., Nicholson, D., & Pekarek, A. (2017). Should we take the gig economy
seriously?. Labour & Industry: a journal of the social and economic relations of
work, 27(3), 232-248.
Leighton, P. (2016). Professional self-employment, new power and the sharing economy:
Some cautionary tales from Uber. Journal of Management & Organization, 22(6),
859-874.
Minifie, J., & Wiltshire, T. (2016). Peer to peer pressure: policy for the sharing economy (No.
2016-7).
Standing, C., Standing, S., & Biermann, S. (2019). The implications of the sharing economy
for transport. Transport Reviews, 39(2), 226-242.
Stephany, A. (2015). The business of sharing: Making it in the new sharing economy.
Springer.
Stewart, A., & Stanford, J. (2017). Regulating work in the gig economy: What are the
options?. The Economic and Labour Relations Review, 28(3), 420-437.
Witt, A., Suzor, N., & Wikström, P. (2015). Regulating ride-sharing in the peer
economy. Communication Research and Practice, 1(2), 174-190.
Yaraghi, N., & Ravi, S. (2017). The current and future state of the sharing
economy. Available at SSRN 3041207.

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