Tax Assignment: Economy, Shared Economy, Business Models Comparison

This assignment explores the concepts of economy, shared economy, and business models, particularly focusing on their implications within the context of taxation. The report begins by defining the economy and its various forms, including the traditional and shared economies, and contrasts them with the black economy. The core of the assignment involves a comparative analysis of two business models in the hospitality industry: Airbnb, which operates under a shared economic framework, and Marriott International, which adheres to a more traditional model. The analysis examines the operational structures, market strategies, and the impact of these models on business performance, with specific examples from the Australian market. It further delves into the taxation and legal frameworks affecting these companies, especially focusing on Airbnb's strategies and potential tax implications, particularly in Australia. The report highlights how Airbnb leverages its online platform to manage its tax burden and the concerns this raises for regulatory bodies. Overall, the assignment provides insights into the dynamics of modern economic models and their interplay with taxation and business practices.

Running head: ASSIGNMENT ON TAX
Assignment on Tax
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer A:........................................................................................................................................2
Answer B:........................................................................................................................................3
Answer C:........................................................................................................................................9
References......................................................................................................................................11

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Answer A:
By the term economy, the situations of a geographical location, in terms of demand-
supply forces are meant, which are usually measured in terms of monetary units. To measure the
situation of an economy in a particular period, the goods and services produced in that particular
economy, within that period of time, is taken into account, in general. The part of the economy,
which can be accounted for is generally known as the white economy, for that concerned region
(Alkon, 2012). These activities fall in the tax framework and regulatory construct of the
economy.
Features of Black Economy:
However, there are several activities, which though present in the economy, cannot be
accounted for and these do not fall in the regulatory and taxation framework of the economy.
These unaccounted economic activities constitute what is known to be black economy. Activities
falling under black economy may not necessarily be illegal in nature, though the illegal
economic activities do fall under this domain mandatorily. To take reference, the services of the
maids who are appointed in various households for performing household tasks, if paid in cash,
automatically falls under the purview of black economy, though the activity is not illegal per se.
Again, originally illegal economic activities, as bribing or money earned by unfair means, fall in
this category (Black, Hashimzade & Myles, 2012).
Features of Shared Economy:
There are different forms of economy existing in the global market, with constant
dynamics and changes in their nature and types along with time. Example of one such form of

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economy is that of the shared economy. a shared economic framework is defined to be that
economy in which the individuals can borrow or exchange assets, including goods and services
that are already owned by other individuals. This imply that in this kind of economy there is
provision of sharing already owned assets in lieu of monetary fees or also in free of cost. From
the beginning of existence of what is known as society, shared economy has prevailed in the
world. Over time the framework has undergone significant changes but the basic intuition behind
the theoretical concept has remained more or less the same (Cohen & Kietzmann, 2014).
The objective of the shared economic framework is the overall maximization of the
welfare of the society as a whole by efficient allocation of the limited resources present in the
economy. Therefore, the under-utilized assets that are lying with one individual can be shared
with another who is in need of the same good or service, in exchange of fares, thereby making
the economy efficient in the aspect of allocation and utilization of resources (Schor, 2016). With
time and advancement of technology and innovations facilitating communication, sharing has
been easier and more convenient in the modern day world, thereby facilitating the existence of
shared economy even more. There are significant evidences of presence of this type of economic
framework in real case scenarios and the model shows potential of future expansion and
dominance (Heinrichs, 2013).
Answer B:
The shared economic framework has received much attention of the business organizations as
well as the governing authorities of different countries as this framework targets towards
achievement of agility and efficiency in the economy, by maximizing the social welfare of the

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economy by increasing the efficiency in the allocation of scarce resources. However, not all the
commercial organizations are advocates of this framework and they believe in operating in a
more traditional economic framework. The traditional business models do not have any
provision for sharing privately owned goods and services with other individuals according to the
need of the society. These models, on the contrary, only allow the utilization of any kind of
assets to its rightful owner and no one else. This portion of the assignment tries to compare and
discuss the features of the two models for business, taking example of real life industry for each
of these two business models.
In this section, both of these models are discussed and their feasibility and practicality in the
contemporary business world is seen by studying their implications on the business performances
of two real business organizations, both operating in the same hospitality industry and having
huge market shares in the Australian economy. These two organizations are Airbnb and the
Mariott International, both of which having significant business activities in Australia. However,
the former one follows a shared economic framework for its operation, whereas the latter
operates in a more traditional framework.
Airbnb has been in operation from 2006 and has earned huge market share in the global market
in the hospitality industry. The organization being acting as a facilitator of accommodation, has
a unique business framework and with time is taking in more and more people under its domain.
With increase in the expansion of the company, more and more organizations are trying to follow
its way of operating (Airbnb.co.in. 2017). However, the enterprise, surprisingly does not own
any kind of lodging or residential properties and it merely acts as an open forum to facilitate the
interactions of the people who wants to take housings or accommodations in lease or rent, across
the world and those who own residential assets and want to rent them out to earn monetary

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benefits. Airbnb ventures in the accommodation industry in a much dynamic manner and the
clients, coming under their domain have the provisions to let out or to take in rent, not only hotel
rooms but also hostels and home stays, depending upon their requirements. Therefore, the
commercial organization, as can be seen from the above discussion, aims to facilitate a more
dynamic and efficient utilization of the existing residential resources in a geographical location,
such that those demanding for them and those having those assets but are not using them can
both profit in the process (Edelman & Geradin, 2015).
Airbnb, not owning any assets per se, acts as a mediator between the two relevant parties as
discussed above and in turn, it receives a percentage of fees from both the sides, for every
booking that has been taken, thereby, giving the company a business structure of that of a
brokerage firm. With 191 countries and 65000 cities under its area of operation, Airbnb has
started operating in almost all the primary locations of the world and it currently gives the clients
the option to choose from more than three million housing and accommodating facilities of
various nature, around the world. In Australia , Airbnb is already enjoying a significant market
share and is also showing immense potential to expand in the near future, much of which can be
attributed to the expansion of the tourism industry of the country. The company has a valuation
of 30billion USD, which is huge for such a new commercial enterprise (Guttentag, 2015).
As is evident from the structure and operational framework of the company, which has been
discussed in the previous section, the working method of Airbnb is much in relevance to that of
the shared economic framework. The unique service mechanism of Airbnb Australia, which
operates as an open and online platform for the interactions of the parties having the spare
housing facilities and those looking for accommodations, thereby indicates the incorporation of
the principles of operations as has been suggested in the shared economic framework. Under the

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domain of operations of this enterprise, people can share their underutilized and pre-owned
private properties (housings and residential facilities in this case) with those who do not have the
privilege to own that particular residential property but has the demand for it. This in turn
facilitates a more dynamic and efficient allocation of the residential resources of the country
which are scarce by their inherent nature. The primary objective of the commercial company, is
mostly to facilitate the supplier-demander interaction, in order to maximize the overall welfare of
the society as a whole, the welfare maximizing being in the accommodation and housing
industry of the county (Möhlmann, 2015).
The company, within a very small timeframe has gained significant positive responses form the
people in the global scenario. The unique services as provided by the company is increasingly
becoming a strong alternative to the conventional way of operations in the hospitality industry
and with time it is taking in more and more people under its domain, both in demand side as well
as in the supply side. The main purpose of the company, which is increasingly becoming the
main plus point in its business structure, is to remove the constrictions and hurdles regarding
finding lodging in different places at affordable rates. The enterprise is breaking those hurdles by
venturing in non-popular but prospective areas across the world. Airbnb, being one of its kind of
service providers in the international hospitality scenario, is projected to experience a he increase
in its area and magnitude of operations both in the world as a whole and in Australia specifically,
with more and more people getting accustomed to the concept of the sharing economic
framework. The tourism industry of the country also experiencing an upward trend, is expected
to contribute significantly in this aspect (Orsi, 2013).
However, in the recent scenario, the taxing and legal framework of the company, especially
Airbnb Australia, is becoming an issue of significant concern especially among the monetary and

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taxing regulatory authorities of the county. The services that are offered by the company are
hugely varied and are also not of purely commercial by nature. This, therefore, provides a
number of avenues for the company to reduce or manipulate their taxing mechanisms. The
company purely operates in an online framework and therefore, the chances of reducing the tax
burden on part of the company becomes even more easy as in an online framework the
monitoring mechanisms on part of the taxing authorities and regulatory bodies are not that
stringent. One of the tactics, as has been seen to be taken by the enterprise, in this aspect alos
supports this view. The Airbnb Australia, when takes any booking for the country itself, both
from the demand side as well as the supply side, does not show the accounts of its transactions
under the Airbnb Australia accounts. All the economic and monetary transactions of the
company is taken into account under the Ireland chapter of the company. This also happens even
if the service providers are operating in Australia and the clients are also demanding
accommodation in the country itself. The company as is speculated by the financial researchers
and speculators to decrease the tax burden of the company does this. The taxation regulations of
Ireland being less stringent and more business friendly, the company tends to divert all of its
accounts to that of its Ireland chapter, thereby making the tax burden less for the company. The
online way of operating also assists the company in this aspect, thereby making this an issue of
concern for the tax regulators and the monetary authorities of the country (Williams, 2014).
Barring these limitations, the enterprise, however, is performing in a really impressive manner in
the global business scenario, which can be seen from its huge revenue earnings and expansion of
clientele with time. The company poses as a strong example of a commercial organization
operating under the shared economic framework and inspires other entrants to adapt this
operating form for their businesses.

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However, not all firms are in favor of the shared economic framework as the concept of sharing
of private properties may not sound to be applicable and feasible in real life to these
organizations. These organizations tend to stick to a more traditional business framework for
their operations. One such example, in this case, as has been mentioned in the above section in
the Marriott International, which also has a significant market share in the hospitality industry in
Australia and has the target of expanding even more in future.
The Marriott International is a chain of luxury hotels all across the world, with an average annual
revenue of $14 billion. It is a traditional hospitality chain, operating in more than 110 countries
and giving their clients to choose from the huge variety of 1.2 million rooms across the world. In
Australia, the company has their properties in primary locations like Sydney and Melbourne and
it plans to expand to other part of the country in near future (Marriott.com, 2017).
The Marriott, being operating under the domain of the traditional business framework, owns
almost all its properties and does not have the provision of sharing private properties with private
individuals of the country. The services are only available to the users after they fully pay for the
services they demand for and they cannot share the services with others.
Over the years, the chain has become increasingly popular in the country and has been expanding
its operation, in an impressive manner, under the traditional economic framework. However, the
company has been facing a huge criticism regarding its pricing mechanisms and predatory
pricing, which to a huge extent contributes to the anti-competitive practices of the enterprise. The
company utilizes its card as a premium service provider at the prime locations of the country and
due to this advantage, they are often practicing luxury pricing as they have confidence on the
goodwill that they have earned and the loyalty of their customers. In spite of these short comings,

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the company is still one of the primary service providers in the hospitality industry of the country
and is an example of the success and viability of the traditional models in the contemporary
business world.
Answer C:
Reducing black economy is one of the primary concern of the governing authority of any
country, including Australia. The Interim Report published by the Treasury in the Black
Economy Taskforce, has made several recommendations for the overall welfare of the economy
of the country (Treasury.gov.au, 2017). Among them, the recommendations, which if
implemented, can be fruitful in the purpose of reducing the share of contribution of shared
economy to the black economy formation, are discussed as follows:
 The incentives should only be given to those small organizations, who are implementing
non-cash models of business, in order to motivate other firms to follow the trend.
 Those firms who have good tax record should also receive the procurement opportunities.
 The overall payment mechanism including flow of cash, should be restricted to a
considerable extent to reduce the impact of the black economy.
 The ATO activities should also be emphasized upon.
 The taxation framework should be regulated and expanded.
 Proper awareness should be generated regarding taxation and related activities should be
spread uniformly, especially to the small firms, in order to make them more competent.
 Technologies should be used in order to make the payment more inclined to the non-cash
mode of payment and reducing the cash payment mechanism.

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 Increase in the incentives for non-cash payments and decrease in the incentives for cash
payments in order to promote the former method.
 The overall regulatory burdens should be bigger on the already established large multi-
national firms and they should be less on the small ones, in order to encourage them to
take risks and motivate these small firms to become competent in the long run.
The recommendations, as mentioned above, in general have the potential of reducing the
share of the effect of shared economy in the black economy formation of the country. Among
these recommendations, those talking about reducing regulatory burdens on the small firms,
increase the usage and implementations of non-cash payment methods, spreading awareness
regarding the taxing framework and regulations and expanding the taxing mechanism, should be
given more importance. This can reduce the problem of the increasing contribution of shared
economy to the black economy of Australia (Singh, Jain-Chandra & Mohommad, 2014).

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References
Airbnb.co.in. (2017). Vacation Rentals, Homes, Experiences & Places - Airbnb. Airbnb.
Retrieved 8 September 2017, from http://www.airbnb.co.in/
Alkon, A. H. (2012). Black, white, and green: Farmers markets, race, and the green
economy (Vol. 13). University of Georgia Press.
Black, J., Hashimzade, N., & Myles, G. (Eds.). (2012). A dictionary of economics. OUP Oxford.
Bond, A. T. (2015). An app for that: Local governments and the rise of the sharing economy.
Cohen, B., & Kietzmann, J. (2014). Ride on! Mobility business models for the sharing
economy. Organization & Environment, 27(3), 279-296.
Daunorienė, A., Drakšaitė, A., Snieška, V., & Valodkienė, G. (2015). Evaluating sustainability
of sharing economy business models. Procedia-Social and Behavioral Sciences, 213,
836-841.
De Jong, M., & van Dijk, M. (2015). Disrupting beliefs: A new approach to business-model
innovation. McKinsey Quarterly, 3, 66-75.
Edelman, B. G., & Geradin, D. (2015). Efficiencies and regulatory shortcuts: How should we
regulate companies like Airbnb and Uber. Stan. Tech. L. Rev., 19, 293.
Guttentag, D. (2015). Airbnb: disruptive innovation and the rise of an informal tourism
accommodation sector. Current issues in Tourism, 18(12), 1192-1217.