Taxation Law and Practice Report: Black and Shared Economy Impact

This report provides a detailed analysis of taxation law and practice, specifically examining the black and shared economies in Australia. It defines the black economy as economic activities outside the purview of rules and regulations, and the shared economy as a system where assets and services are shared between individuals. The report compares the business models of TaskRabbit, a company operating within the shared economy, and Laundry Group, a more traditional business, highlighting the differences in their operations, financial performance, and tax implications. It also discusses the recommendations made by the Treasury in the Black Economy Taskforce Interim Report. The report explores the impact of these different economic models on taxation outcomes and considers how the shared economy might contribute to or mitigate the issues associated with the black economy.

Running Head: TAXATION LAW AND PRACTICE
Taxation Law and Practice
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Answer to Question A.....................................................................................................................3
The Black Economy:...................................................................................................................3
Shared Economy:.........................................................................................................................3
Answer to Question B......................................................................................................................4
Answer to Question C......................................................................................................................9
Reference.......................................................................................................................................12

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Answer to Question A
The Black Economy:
The Black economy refers to that part of the economy that prospers at the expense of the
Government of a country. The part of the economy that is accounted for can be referred to as the
white economy as it falls within the ambit country rules, regulations and tax net. Exactly
opposite of this segment of the economy is known as black economy. The economic activities of
a country that are outside the purview of the country’s rules, regulations are known as black
economy (Schneider & Enste, 2013). These economic activities are conducted without following
the rules and regulations of commerce of the country and are not accounted for taxation
purposes. However, it is important to note that such activities need not be illegal thus, there can
be legal activities too, which are part of black economy of a country. The characteristics of goods
and services of a transaction would determine whether these are legal or illegal activities. For
example a worker who is involved in construction work if paid under the table, the payment
under the table will be part of black economy however, the construction work though legal. The
fact that the payment has been made to the worker under the table to avoid payment of tax, both
the person who has paid for construction work and the worker have flouted the rules and
regulations to avoid payment of taxes (Guttentag, 2015).
Shared Economy:
In an economic system in which the assets as well services can be shared between private
individuals of the country in exchange of fees or free of cost is known as a shred economy. To
put it other way the individuals in a shared economy have the ability to borrow or rent assets
owned by other individuals of the country. This system of shared economy has been in use since

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the advent of society. Over the years the ways of sharing have only changed but the objectives
have more or less been the same, i.e. to enrich the lives of people of a country. In modern day
and age of internet the sharing have become easier and happening at larger level than ever
before. Under used assets are used by individuals and groups to make money in a shared
economy thus, there are numerous possibilities in a shared economy which is not available in
closed economy (Schneider, 2015).
Answer to Question B
A closer look at the Australian economy will help us to understand the importance of
business organizations operating in accordance with the concept of shared economy. Though in
general most of the top business houses in the country follows the more traditional method of
doing business however, the contribution to the overall development of the Australian Economy
made by business organizations and firms operating under shared economy concept cannot be
denied. Airbnb, Snapgoods, Dog Vacay, Relay Rides, Task Rabbit, Getaround Liquid are few of
the well-known names in the shared economy in the country that have showed other
organizations a way different from traditional concept of doing business. Thus, these
organizations and businesses can be termed as the pioneers of shared economy concept in the
country (Dunleavy, 2015).
TaskRabbit works as a bridge between service seekers and service providers through its
online portal and mobile market place. With its online and mobile market place it attracts the
freelance labors and workers to engage their efforts in a concerted manners towards satisfying
the demands of services and different types of works in the market place. The main objective
with which the organization had come into force was to match the freelance labor with the
demands in the local market. As the concept prevails in shared economy, it is about sharing the

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resources and assets owned by the others which remain unused to benefit others. TaskRabbit
allows consumers and clients to find immediate solutions with their regular work and activities.
These include regular cleaning, moving things from one place to another place, delivery of goods
or other materials and assets, handyman work etc. TaskRabbit plays a huge part by its online and
mobile market place for both those who needs such services to be done and to those who will
provide these services in exchange of a particular fees (Dunleavy, 2015).
The company was founded in the year 2008 by Leh Busque and has astonishingly
received $37.7 Million till now to fund its activities. The company at present has as many as tens
of thousands of vetted. The reason for such huge funding is the popularity of the concept of the
company and its importance on the daily lives of the people of the country. It is beyond any
doubt that people need support on daily basis to sought out various works and activities in their
homes and offices which often seem simple but far from that. TaskRabbit allows consumers to
use the services of the service providers even for simplest of works with a minimum expenditure.
TaskRabbit provides background checks on the service providers to ensure that only individuals
with clean and clear images are allowed to provide services to the people in general. The
company has “taskers” available to provide necessary support to the consumers in background
checking in different category of services to ensure that the consumers are not under any possible
threats from the service providers (Pearson, 2017).
At the time of starting the operations in 2008 TaskRabbit accumulated $1.8 Million in
seed funding from firms in venture capital business. In the year 2011 the company closed a $5
Million series financing and in July 2011, the company launched an app to allow the service
seekers to provide their desired services and tasks by posting from their iPhones. An additional
funding of $17.8 Million was received under series B round of funding. The progress of the

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company can be assessed from the fact that by this time the company had 35 employees and
generated business of $4 Million in each month. In the year 2013 a new tool was introduce by
the company named TaskRabbit Business to allow business organizations top hire temporary
work force according to their needs from the users of TaskRabbit. The concept of shared
economy and its advantages cannot be better described in any other business as the business of
TaskRabbit Company is a perfect match with the concept of shared economy (Pearson, 2017). At
present the company is one of the most sought after business organizations in Australia and a
prime contributory in shared economy in the country. It would not be wrong to say that
TaskRabbit is one of the pioneers in shared business economy in the company and has shown
many organizations the way to do business under the concept of shared economy. The business
aspect of shared economy has never been given second importance to anything else as often is
given a reason by big firms and organization as a reason for not following the path of shared
economy rather if the concept of shared economy is properly followed it could be a game
changer in developing the economy of a country. A closer look at the operating results and
financial position of the company will help us to assess the overall impact of shared economy on
the business. The performance of the business over the years have shown an increasing trend as
it started from zero employee in the year 2008 and then appointed its first full time employee in
the year 2009 and now have more than 100 dedicated employees working for the organization.
The operating results have also shown positive attributes as it has a business worth Millions of
dollars in every year now (Kelsey, 2015).
Laundry Group is an organization which is providing opportunity for regular and ongoing
freelance work in the country to help the consumers and customers in their daily activities. The
business follows the path of more traditional economy and do not believe in the concept of

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shared economy. Situated in Brisbane, Australia the organization has been in the business of
providing support for day to day works and activities for quite a few years now. The organization
similar to TaskRabbit uses the on-line and mobile marketing features to reach to the maximum
number of consumers and customers possible. The organization explains its business as
connecting brands to customers. Compare to the shared economy the traditional economy is
more business specific in its approach as it does not believe in the concept of sharing and
allowing others to make use of the resources owned by others. The differences between the way
two businesses, i.e. TaskRabbit and Laundry Group, operate are vast and major. One is a firm
believer in sharing economy and allows consumers and customers to use the resources owned by
it to benefit them as well as the company itself. However, on the other hand organization like
Laundry Group is a traditional business organization and only motivated to maximize its profit
and shareholders’ wealth by taking all possible measures. Pay and use is the motto of the
organization in traditional economy and it is not different for Laundry Group. The organization
started it business a decade ago has now a huge market presence in Australia. The organization
uses the unlimited reach capability of online and mobile market place to reach to millions of
customers and consumers across the country(Pearson, 2017).
A recent report on the workings of the company’s internal structure and the way it serves
the customers and consumers makes it amply clear that the company uses the characteristics of
traditional economy very effectively to make profit from business activities. The organization
has conducted its business very efficiently over the years as is clear from the increasing trends in
its profits. The organization earned a mere profit of $21000.00 in the year of its formation which
increased by 3 times in the very next year as the organization made a profit in excess of
$83000.00. The fact that the organization was able to make profits in its very first year in

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business is due to the traditional economy and its business model. As for organizations in shared
economy the chances of earning profits from the very beginning is very slim as the organizations
in shred economy are more careful about allowing others to get equal benefit from the use of
resources not owned by them as they believe in the concept of sharing resources for the financial
benefits of each other. The traditional business organizations on the other hand are only
motivated to maximize the profits from business and maximizing the wealth of the shareholders.
The taxation outcome of organizations working under two different economies are
significantly different due to the way of doing business. For companies working in shared
economy the tax consequences are relatively less compare to the organizations working in
traditional economy. This is also due to the fact that traditional business organizations have a
specific goals of maximization of profit which is not the case for organizations in shared
economy (Kelsey, 2015). Due to these differences the final tax inability of an organization in
shared economy is generally much less as compare to an organization working in a traditional
economy. However, it is important to note here that no organization should be allowed to use the
shared economy concept as a veil to avoid payment taxes.
Answer to Question C
Let us first go through the recommendations made by the Treasury in Black Economy
Taskforce Interim Report before analyzing which of these recommendations would be successful
in reducing the contribution of the sharing economy to the problem of black economy
(Dunleavy, 2014). Here are the recommendations of the Treasury of Australia to reduce the
contribution of shared economy to black economy:

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 Only firms with good tax records should be allowed access to the procurement
opportunities of Australian Government.
 Incentives should be given to the small firms and business organizations which have
made investments in non-cash business models to motivate others to follow the same path
(Winer et al., 2013).
 Taxation payment reporting system should be expanded.
 Payment of cash wages and payments to the contractors in cash should be restricted by
providing tax deductibility imposition for such payments.
 All technologies used to suppress sales should be banned immediately
 Business registration integrity shall be enhanced by taking modernization steps in this
regard.
 Necessary training shall be provided to small firms and business organizations on
taxation related matters.
 Increase amount of funding shall be made on ATO activities.
 Reduction in regulatory burdens for small business and firms to ensure that these
organizations are not over burden with the regulatory requirements,
 Imposing limitations on cash payment across the economy to achieve better tax net
expansion in the whole economy
 A sharing economy-reporting regime shall be introduced for better taxation system.
 GST threshold shall be lowered.
 Amnesties should be used less.
 Unnecessary arrangements shall be withheld.
 Data privacy shall be increased and used effectively by the Government agencies.

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 Phoenix taskforce shall be introduced.
 Beneficial ownership reforms.
The above recommendations need to be implemented properly in order to achieve the
objective of Black Economy Taskforce. Thus, the recommendations made by the Treasury if
implemented properly will be help in achieving the desired objectives of reduction of
contribution of shared economy in overall black economy (Pearson, 2017). The
recommendations that will help the government to achieve the desired objectives are:
 The increase of regulatory requirements withholding the unnecessary arrangements,
 The limited use of amnesties,
 The sharing economy reporting regime,
 The increase in non-cash payment incentives,
 The limiting cash payments across the economy,
 The reducing regulatory burdens on small business and firms,
 The providing of training to small businesses and firms to adhere to the taxation
requirements,

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