Taxation Law and the Sharing Economy

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
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.

2TAXATION LAW
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.

3TAXATION LAW
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.