Tax Compliance in the Sharing Economy in Australia

Topic: Sharing Economy
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Topic: Sharing Economy
Question a
Income tax is one of the major sources of revenue remitted to the Australian government
by the Income tax includes tax levied on capital gains withholding tax and that which is levied
on goods and services. Regarding this, it is only the federal government that has authority to levy
income tax. Following this, the country has a full imputation system that ensures there are no
costs regarding avoidance of economic double taxation on dividends (Owen, Jong and Migai
2018). In this relation, company tax to be paid is imputed to shareholders; this is to ensure that
residential shareholders do not pay tax on dividends from profits which are normally taxed by
the government at the company level. In addition, the country operates a full-self assessment
system that gives the level of tax compliance. Similarly, the country has a number of regimes
that have been developed to ensure that cases of evasion and avoidance of tax are prevented. The
regimes include: the thin capitalization rules; CFC rules; a general anti-avoidance rule (GAAR) a
promoter penalties regime and a transferor trust regime. Since the regime ensures compliance in
all areas, this is a clear indication that the tax rules in Australia do not favour a subsidiary over a
branch operation or vice verse because all income from the various companies is subject to
taxation
In addition, the major tax legislations governing tax in Australia are the: 1936 Income
Tax Assessment Act And the 1997 amended Tax Assessment Act. Following the two
legislations, taxable income refers to income arrived at after an entity computes its assessable
income and subtracts the allowable deductions. In this sense, assessable income comprises of
both ordinary and statutory income, where ordinary income refers to gross income of a company
such as proceeds from provision of certain services for instance, services offered by Uber
drivers, Airbnb accommodation; dividends; royalties and rent (Reuters, 2014)

Topic: Sharing Economy
On the other hand, sharing economy refers to a form of economic model normally
defined as peer to peer market places. The economy entails a number of platforms like Airbnb
and Uber whose popularity has grown in the recent past as they are able to provide consumers
with a variety of choices and supplier an opportunity to make profit. Following the development,
a number of emerging issues relating to issues of tax and their regulation in general has risen.
Therefore, the questions that are sought to be answered are: how to ensure that providers of
shared economy comply with the Australian income tax and two models that can be developed or
enhanced to ensure the shared economy providers meet their tax obligations (Owens & Jong et
al, 2018)
Regarding the degree of compliance with income tax obligations and how viable it is, the
various departments in charge of tax such as the Australian taxation office, have to understand
how the providers work and make money. For instance Airbnb is a company that is known in
over than 191 States and this has enhanced its reputation and revenues. Airbnb main revenue is
drawn from bookings it charges at a certain fee. Following this, guests pay a non-refundable fee
of around 6%-12% depending on the guest’s number. However, a lower service fee is charged on
expensive reservations so as to allow large families save money for other expenses such as
travelling (Nath, 2018)
Similarly, the hosts or rather suppliers are charged a 3% fee to enable process payments
made by guests. Further, the consumers are to pay the value added tax which is normally tax
charged on the final sale of goods and services. The charge depends on the international and
local tax laws. For instance, guests looking for accommodation in the larger European union
have to pay the value added tax (VAT) and the service fee based on the rates of their country
while guests across the board may not be charged due to the difference in the nature of tax laws.