1. Exploring the VAT/GST implications of the sharing/gig economy as part of the platform economy – a broad perspective

1.1.1. The objective of this report

It is recognised that the sharing/gig economy gives rise to a variety of economic, social, tax, legal and regulatory questions beyond VAT/GST policy design and administration and compliance. While this report considers the possible impact of these various aspects on VAT/GST policy and administration and vice-versa, where appropriate, it focuses exclusively on the VAT/GST aspects.

Accordingly, the overall objective of this report is to enhance tax authorities’ understanding of the sharing/gig economy from an economic and commercial perspective, identify and analyse the opportunities and challenges it creates for VAT/GST policy and administration and to suggest the possible policy approaches and measures that tax authorities could consider in this context.

The underlying assumption is that tax authorities may wish to monitor and consider the VAT/GST implications of the sharing/gig economy in light of their specific circumstances and policy objective(s). The policy objective may not necessarily be to bring (all) sharing/gig economy supplies within the VAT/GST net.

This report does not aim at prescription for national legislation. Jurisdictions are sovereign with respect to the design and application of their laws. Rather, the report seeks to enhance jurisdictions’ understanding of this evolving phenomenon and assist the tax authorities in evaluating and developing possible policy responses to address the VAT/GST implications of the growth of the sharing/gig economy, with particular guidance to maximising the effectiveness of such measures and to the extent possible their consistency across jurisdictions. International consistency will assist to facilitate compliance, lower compliance costs and administrative burdens and improve the effectiveness of the VAT/GST systems, recognising in particular that a number of the sharing/gig economy actors, notably digital platforms, are likely to be faced with multi-jurisdictional obligations.

Considering the sharing/gig economy as part of the broader platform economy but with specific characteristics, this report complements the 2019 Digital Platforms report (OECD, 2019[1]). It intends to be evolutionary in nature, notably in light of the rapid development of technology and a wide range of activities involved and their delivery processes.

1.1.2. The scope of this report

This report discusses the key features of the sharing/gig economy and its business models that are likely to be relevant from a VAT/GST perspective and presents a range of possible policy responses to address the impact of sharing/gig economy growth on VAT/GST policy and administration. These responses include potential roles for digital platforms involved in the sharing/gig economy supply chain as well as broader policy and administration options.

In evaluating available VAT/GST policy approaches against the key VAT/GST relevant features of the sharing/gig economy, this report takes into account the potential policy objectives pursued by a jurisdiction as well as the desirability for a jurisdiction to consider the Ottawa Taxation Framework Conditions, notably in respect of neutrality, efficiency, certainty and simplicity, effectiveness and fairness, and flexibility in framing and implementing the policy and administrative measures.

The report relies as appropriate on the International VAT/GST Guidelines (OECD, 2017[2]) and other relevant OECD work in response to the digitalisation of the economy, notably the 2019 Digital Platforms report (OECD, 2019[1]) and the 2020 Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy (OECD, 2020[3]). Experience and analysis in jurisdictions that have taken VAT/GST measures in respect of the sharing/gig economy or that consider doing so, have informed this work and vice versa, as part of the ongoing sharing of analysis and experience.

While recognising that the growth of the sharing/gig economy may create different VAT/GST pressures, depending on the sector as well as jurisdictions’ market structure and their VAT/GST system, evidence suggests that the accommodation and transportation sectors currently create the most urgent pressure on VAT/GST policy in jurisdictions worldwide and are therefore likely to require the most urgent and/or most extensive policy and/or administrative action from a VAT/GST perspective. The accommodation and transportation sectors are therefore used as pilot sectors for the analysis of the operation of the sharing/gig economy, respectively based on the sharing of assets and the sharing of labour (see further Annex D to this report). The analysis of these two sectors is expected to be helpful in informing the analysis in respect of the other sharing/gig economy sectors as appropriate.

The report endeavours to use neutral terminology rather than terminology that may already be used in specific jurisdictions or may have a different meaning across jurisdictions. It is important, therefore, for jurisdictions to take account of the broad meaning of the terms used in this report.

The report does not try to define the term “sharing/gig economy” as it is a concept that is likely to evolve over time. A number of different terms have been used in the literature as well as by jurisdictions that have either implemented policy actions to address the VAT/GST implications in this area, or are considering doing so. It has resulted in a unique set of nuances and challenges, not least for policy makers trying to measure its size and impact and identifying appropriate policy responses. Hence the report uses the term “sharing/gig economy” as a generic term to refer to part of the platform economy that has a number of specific features that are considered relevant from a VAT/GST perspective. Considering such specific features and building on already available definitions, a broad (working) description is used as a placeholder for the purposes of this report to refer to the sharing/gig economy as: “An accessibility-based socio economic model, typically enabled or facilitated via advanced technological solutions and trust-building tools, whereby human or physical resources and/or assets are accessible (for temporary use)/shared – to a large extent – among individuals for either monetary or non-monetary benefits or a combination of both”.

In general, sharing economy activities notably involve the temporary substitution of ownership of (sometimes) underutilised assets/resources as opposed to the transfer of ownership such as sharing of one’s apartment for short-term (vacation) rental purposes or sharing of a tool (equipment) for a manual work. Gig activities are in principle aimed at providing opportunities to a (high or low) skilled labour force to provide labour and/or professional services in the context of a labour market characterised by the prevalence of short-term and often non-standard contracts or freelance work as opposed to permanent jobs and standard labour contracts (c.f. Tax Challenges Arising from Digitalisation – Interim report 2018 of the OECD/G20 Base Erosion and Profit Shifting Project (OECD, 2018[4])). These gig activities could include cleaning, gardening or more intellectual services such as web design, IT services and consultancy. The distinction between sharing and gig categories is not always clear-cut (e.g. the case of a driver that has spare capacity in his/her car and offers to take passengers who want to travel to the same direction for a fee). Sharing/gig economy actors may often offer a mix of asset and labour sharing activities.

This report recognises that the VAT/GST status of sharing/gig economy actors (including platforms and underlying providers) in a given jurisdiction will generally be determined by that jurisdiction’s normal VAT/GST rules, often on a case-by-case basis in light of specific facts and circumstances. This includes the question whether a sharing/gig economy platform acts as a principal or as an agent for VAT/GST purposes (see Box 1.2. below). The new main challenges for VAT/GST policy and administration result from the large numbers of new economic actors that may enter the VAT/GST system as a result of sharing/gig economy growth. These new actors may often have a limited VAT/GST knowledge and/or capacity to comply (i.e. micro-businesses, SMEs) while their activities may involve considerable VAT/GST revenues and create risks of competitive distortion that are limited at an individual level but may be significant at an aggregated level. The aim of this report is primarily to identify and analyse these challenges and to present a range of possible options for tax policy and administration to address them.

1.2.1. The rapid growth of the sharing/gig economy on a global and regional level

The rapid growth of the sharing/gig economy is a global phenomenon. A range of major sharing/gig economy platforms are operating across multiple jurisdictions worldwide. As the sharing/gig economy continues to evolve, and given the complexity and variation of the platforms and activities involved, there are not yet a great deal of data available that provide a reliable insight into its true size. The collection of statistical data to measure its size, growth and activity has proven to be challenging but efforts are being made to develop a framework and methodology to improve the measurement of the sharing/gig economy. Despite these difficulties, available evidence suggests that the sharing/gig economy has significantly grown and expanded globally in recent years with significant potential for further growth in the future. A 2019 study covering the major markets around the world suggests that sharing/gig economy activity was worth USD 204 billion in 2018 and is projected to reach USD 455 billion by 2023 as consumers are becoming more receptive to the idea of sharing and as digitalisation accelerates (Mastercard and Kaiser Associates, 2019[5]).1

The sharing/gig economy is constantly evolving. The Covid-19 pandemic (see Annex B for further analysis) together with other developments in the regulatory domain (e.g. developments in labour law that could reshape the relations between the platforms and their providers) and in the technological landscape (e.g. the potential use of self-driving cars in the future) could transform the scope and scale of the sharing/gig economy both at national and global level. Hence there is a need for continuous monitoring of developments in this area.

Emerging key sectors of the sharing/gig economy

Given its versatile nature, the sharing/gig economy can potentially involve a wide range of activities across different sectors of the economy. Box 1.1. below describes the four emerging key sectors of the sharing/gig economy.

Box 1.1. Emerging key sectors of the sharing/gig economy

• Transportation sector: typically, the platform connects drivers, who may be non-professional in the sense that they may not possess professional permits (e.g. taxi medallion) other than a legitimate driver’s license, with passengers, often private individuals, for either a short or long distance trip. It is noted that jurisdictions increasingly implement measures that require drivers to obtain professional permits to operate, notably in an online ride-sourcing context (see further in Annex D).

• Accommodation sector: typically, the platform connects potential guests with professional or non-professional hosts offering accommodation services. Increasingly, the platform may offer other services such as air travel, car rentals and vacation experience either on their own name or on behalf of other platforms and/or third parties (see further in Annex D).

• On-demand services sector: typically, the platform enables (often) private individuals to locate high or low-skilled labour force with spare capacity to provide labour and/or professional services. The services could include (skilled) manual work such as cleaning, moving, carpentry that mostly involve physical delivery and professional services such as web design, consultancy, legal, IT, data entry, ‘click-work’ that mostly involve digital delivery.

• Collaborative finance, including crowdfunding, lending and donations: typically, the platform connects individuals and businesses to invest, lend and borrow money directly between and from each other without the involvement of traditional financial institutions such as banks. These mainly include crowdfunding platforms and peer-to-peer lending platforms (either individual-to-individual consumer lending or investor to SMEs and/or start-ups lending).

Source: OECD research based on public sources

Among these sectors, evidence suggests that the accommodation and transportation sectors are the two largest sectors in terms of total transaction value. These sectors collectively represent approximately 90% of the total sharing/gig economy market value globally (see Figure 1.1. below).

It is projected that the growth rates of the current two largest sectors (i.e. transportation and accommodation) will remain high in the coming years as these two sectors continue leading the market. Sub-business models in the transportation sector, such as the delivery model (e.g. food delivery; shopping delivery), are also expected to grow rapidly as major ride-sourcing platforms are continuing to expand into these areas, leveraging their well-established network of drivers to differentiate their service offerings (see further description of sub-business models in Annex D). The professional services sector and the crowdfunding/lending sector are two other sectors with considerable growth expectations.

Figure 1.1. Sharing/gig economy volume by sector (Billions USD, 2018)

Note: The markets covered include Australia, Brazil, France, India, Indonesia, United Arab Emirates, United Kingdom and the United States.

Source: The Global Gig Economy: Capitalizing on a ~$500B Opportunity (2019) by Mastercard and Kaiser Associates (Mastercard and Kaiser Associates, 2019[5])

1.2.2. Drivers of the sharing/gig economy

The recent proliferation of the sharing/gig economy activities in the past decade has been largely driven by the advances in technology, enabled to a large extent by digital platforms that offer enormous potential to scale fast, increase the scope and frequency of transactions with reduced transaction costs and increased accessibility combined with enhanced trust assurance and ease of connection and payment.

In addition to the technological developments, available studies and evidence suggest that there are various social and economic factors that drive the growth of the sharing/gig economy. One key factor is the high market demand, i.e. consumers’ interest in the sharing/gig economy products/services and the desire to monetise (under)utilised existing uses of assets that has attracted significant levels of private funding especially in certain sectors e.g. ride-sourcing.

Another factor is the changing economic behaviour, notably in the aftermath of a financial and economic crisis, whereby people are seeking ways to save and earn supplemental income while embracing a more “flexible” work-life environment. This attitude is more profound amongst younger people. Evidence shows that individuals providing labour-intensive services are typically from the lower end of the income spectrum, while those providing capital-intensive services have higher average monthly incomes.

In addition, the absence of (adapted/targeted) regulation may play a role. One of the drivers for the growing popularity of the sharing/gig economy is arguably the low barrier to enter the sharing/gig economy, notably as a consequence of the absence of (adapted/targeted) regulation, allowing consumers and providers to switch roles easily and quickly. This means in practice that individuals may easily opt for a regular (full-time) activity, making the sharing/gig economy activities their primary source of income, or irregularly at a lower frequency (part-time) to supplement other income. This flexibility to determine when to supply services can be of great value, as it reduces the opportunity cost of working and increases efficiency. It may have positive well-being effects by allowing sharing/gig economy participants to work a few more hours or renting out an asset, and thus loosen their budget constraints and expand their opportunities.

Other social factors could include increased environmental concerns. People may consider the sharing of underutilised assets as an effective way to reduce waste and to engage in a more environmentally friendly and sustainable economy. Moreover, people may associate the sharing/gig economy with social initiatives, such as empowering communities and improving access to a variety of goods, services, and facilities that would otherwise be unavailable or restricted to large businesses or high income households. Development of a sharing mentality among younger people is an additional factor driving the change.

1.2.3. Business models operated by digital platforms in the sharing/gig economy – An overview

As indicated before, digital platforms are at the forefront of sharing/gig economy development and growth as they employ advanced technology to connect providers and users of a continuously growing variety of sharing/gig economy services. The digital platforms involved in the sharing/gig economy activities cover a broad spectrum, ranging from small start-ups focusing on a specific niche to global giants. New sharing/gig economy platforms are continuously emerging and their business models continue to evolve. Even within the same sector, variations of different business models may operate.

Figure 1.2. below illustrates four typical business models operated by sharing/gig economy platforms categorized on the basis of their “control” and “rivalry” dimensions as follows:

• The “control element”, i.e. the level of control exercised by the platform operator (e.g. whether the platform dictates the terms of the service delivery), will often differ among platforms. For example, a platform may exercise a high degree of control over the entire service delivery (e.g. acting in the name of the provider or reselling the service, managing content and sales, matching providers with users through a centralised app, dictate the price); or the platform may exercise a loose control and act more like an overseer of the platform rather than a supervisor, in which case the platform controls the user experience on the platform, but the underlying supply and its terms are controlled by and contracted between the provider and the user. It orchestrates the participants’ efforts and it gains a competitive advantage by cultivating long-term relationships with supply-side participants. Despite the differences in business models, all platforms appear to exercise control to some extent as it is in their own interest to streamline the services to facilitate the transaction and create optimal experience for customers.

• Additionally, the “rivalry element”, i.e. the degree to which a market mechanism operates in the platform, may also differ among platforms. For example, users may be allowed to set their own prices based on recommendation by the platform algorithm that takes into account supply and demand; or prices may be set on the basis of a dynamic pricing algorithm that reflects changes in supply and demand, or on the basis of predefined categories rather than on dynamic adjustments. The providers may be obliged to apply prices as determined by the platform (typically used by ride-sharing/car-pooling platforms).

Figure 1.2. Four business models of the sharing/gig economy platforms

Source: Four Models of Sharing Economy Platforms (2017) by MIS Quarterly Executive (Constantiou, 2017[7])

From a VAT/GST policy perspective, it may be useful to note that these variations in business models within sectors may have an impact on the degree of control that a platform operator exercises over the supply/users of the platform; the information collected by or available to the platform; the payment flows for the sharing/gig activities facilitated by the platform. Annex D provides a more detailed description of the business models operated by the major platforms in the two largest sharing/gig economy sectors, i.e. the accommodation and transportation sectors, including the key features of these platforms and functions performed.

1.3.1. Key features of the sharing/gig economy that are relevant for VAT/GST policy design and administration

As the sharing/gig economy continues to evolve rapidly and new business models emerge and converge with existing business models, it is increasingly difficult to draw the line between sharing/gig economy activities and other activities in the broader economy. Nevertheless, the sharing/gig economy has specific characteristics compared to the broader platform economy that merit further evaluation and analysis from a VAT/GST perspective.

Digital platforms are at the forefront of sharing/gig economy growth, by connecting providers and users through advanced technological solutions and trust-building tools such as online reviews, reputation mechanisms and secure online payment systems (see Annex D for a further overview of platform features). For the digital platforms involved in the sharing/gig economy, these tools are essential features as the need for quality assurance, verification, optimisation of customer experience and payment security is crucial for their success.

The underlying activities in the sharing/gig economy are generally not new (e.g. transport services, accommodation rentals), but the rise of sharing/gig economy platforms powered by digital technology has enabled their scale, scope and frequency to reach an unprecedented scale at global level. Some of these activities may have been typically untaxed or non-taxable under existing VAT/GST regimes (e.g. the exploitation of an asset by a private individual). The scope of these sharing/gig activities is potentially limitless as long as technology is capable of supporting interactions between providers and interested customers.

Sharing/gig economy providers are often private individuals2 that may carry out high numbers of low-value (“micro”) transactions, particularly in gig economy sectors such as transportation (ride-sourcing). These individual providers may undertake the sharing/gig economy activities to supplement their primary source of income and their engagement may thus be of an infrequent/occasional nature and be spread across multiple platforms.

These providers may often use assets that they also use partly for private purposes. These (private individual) providers are often likely to have no or limited knowledge of VAT/GST obligations and may not have the capacity to comply with these obligations even if they are aware of them. Moreover, the profile and status of sharing/gig economy providers is diverse and in constant evolution. While private individuals acting in a self-employed capacity with an often higher-than-average level of income volatility may represent a large share of sharing/gig economy providers, it does not exclude that their activities may just as easily be performed by individuals that have incorporated their business activity and/or that are less exposed to income volatility, or that these providers’ relationship with a platform evolves to one that may become akin to an employer-employee relationship under some business models (These aspects are further considered in section 1.3.2 below).

Platform technology allows these providers to easily access large numbers of potential customers with no or minimal upfront investment. The sharing/gig economy can thus potentially transform a large number of individuals operating through a platform into businesses (possibly with global coverage) that can collectively compete with the (largest) traditional economic operators. For example, the large numbers of private individuals that are now offering their property for short-term rental via accommodation platforms have become real competitors for the traditional hotel sector. The line between a private individual and a business thus becomes increasingly difficult to draw.

Sharing/gig economy platforms may often have no physical presence in the jurisdiction where the transactions that they facilitate are carried out (performed and/or used or consumed). The providers of the sharing/gig economy activities generally have a presence in the jurisdiction where these activities are performed and/or carried out. This presence may involve the physical presence of the provider in the taxing jurisdiction (e.g. driver’s presence in the ride-sourcing sector) or may be limited to the presence of provider’s assets in the taxing jurisdiction (e.g. immovable property of a certain value to be located in the taxing jurisdiction). Providers may temporarily move across jurisdictions to engage in sharing/gig economy activities (e.g. frontier workers or people who stay in a jurisdiction for a couple of months to undertake a sharing/gig economy activities) even though these cases are rare. While users and providers of sharing/gig economy activities may often both have a physical presence in the jurisdiction where these activities are performed and/or consumed at the time of this performance or consumption (e.g. the transportation services or the short-term rental), this is not necessarily always the case (notably where services can be provided remotely) and providers and users may have their usual residence or business establishment in different jurisdictions.

Sharing/gig economy activities generally involve the (temporary) use of resources (assets and/or labour) without involving any transfer of ownership of assets. These activities could involve renting, swapping and sharing of assets; either for a fee or against compensation of the cost of the activity proportionate to the use of the asset (cost-sharing arrangements). Sharing/gig economy activities may also be performed for a non-monetary consideration (i.e. in-kind compensation).

Certain types of the sharing/gig economy activity may however no longer involve the “sharing” of excess capacity as described above but evolve towards a more traditional type of service activity, facilitated by a digital platform. Take the example of a driver who leases out a car that (s)he did not have before in order to offer rides, versus a driver that may have spare capacity in his/her car and plan on driving particular route with passengers who want to travel on the same route. The same is true for (underutilised) assets in the accommodation sector: it may become increasingly less clear whether a short-term rental activity relates to a (temporarily) underutilised property, or whether the property has for instance been acquired as an investment and is predominantly offered for short-term rental.

Payments in the sharing/gig economy are typically made through electronic means of payment (e.g. credit cards, e-banking, bitcoins, etc.) with or without the involvement the platforms (payment processing can be outsourced to third parties). This widespread usage of electronic means of payment could enhance the access to data to facilitate the tracing and monitoring of sharing/gig economy activities and/or to relevant data for VAT/GST compliance in respect of the sharing/gig economy supplies (incl. to support platforms taking on these compliance obligations on behalf of the sharing/gig economy suppliers). Evidence suggests that cash payments are still accepted in certain sectors and/or by certain operators, especially in developing economies.

1.3.2. Identifying the key actors/interactions that may be relevant from a VAT/GST perspective – A basic scenario of the sharing/gig economy supply chain

Determining the role/status of the actors involved in the sharing/gig economy supply chain is an important element when considering the VAT/GST treatment of a sharing/gig economy supply. Building on the key VAT/GST relevant features of the sharing/gig economy, Box 1.2. below provides an illustration of a basic scenario of the sharing/gig economy supply chain and potential interactions among the key sharing/gig economy actors with additional considerations from a VAT/GST perspective.

Box 1.2. A basic scenario of the sharing and gig economy supply chain - typical interactions among the key sharing/gig economy actors that may be relevant from a VAT/GST perspective

Note: the sequence of numbers assigned in the diagram is for identification only. It is not intended to indicate the timing of a specific step in chronological order.

Source: OECD analysis.

Although there are many different sectors in which sharing/gig economy platforms operate, and their business models vary, a sharing/gig economy transaction will typically involve the following different group of actors/participants, which may not necessarily be located in the same jurisdiction:

• The provider¹ (often a private individual) who shares assets, resources, time and/or skills in exchange for a consideration/fee (monetary);

• The user of these assets, resources, time and/or skills. Often the user is a private individual, but users with a business status cannot be excluded particularly in certain sectors (e.g. the accommodation and/or on-demand services sectors).

• The sharing/gig economy platform (SE Digital Platform) that enables access to advanced technology and trust building tools and allows providers to be connected with other users for the provision of sharing/gig economy supplies, directly or indirectly, to such users. Several terms may be used at national level to denominate these actors, including: “platforms”, “(online) marketplaces”, “electronic interfaces” or “intermediaries”.

With respect to the role of the digital platform in the supply chain, two main broad scenarios can be distinguished:

• Under scenario 1 (illustrated with arrow 1a on the diagram), the sharing/gig economy platform directly connects the provider(s) and the user(s) with respect to a sharing/gig economy supply. In return, the digital platform may receive a consideration/fee from either the provider or the user or both (the “agent role”).

• Under scenario 2 (illustrated with arrow 1b on the diagram), the platform first acquires the sharing/gig economy supply from the (underlying) provider and then it provides it in its own name to its user(s). Under this scenario, the platform is regarded by national legislation as the supplier of the service (the “principal role”). Often, these platforms contract with the individual underlying provider and they act as the contracting party to provide the service.

In determining the exact role/status of the digital platform and the underlying providers, it is recognised that national labour law may have an impact. This is particularly the case where the platform is considered to have a legal or de facto employment relationship with the (underlying) provider under national labour law. Under such circumstances, the platform may be considered as having provided the supply in its own name and on its own behalf (i.e. acting as principal) and the underlying provider may be considered as an employee.

Other actors can also be involved in the supply chain of a sharing/gig economy activity, with direct or indirect connection to the digital platform and/or the provider and/or the user. For example, in the food (meal) delivery activities, different providers may be involved in the preparation of the meal and subsequently in the delivery of the meal to the customer. In the accommodation sector, an agent may directly interact with a platform with respect to the listing of apartments that may belong to different owners who are not necessarily known to the platform.

¹ Even though the sharing/gig economy may involve supplies between (large) businesses, the focus of the analysis is particularly on the involvement of private individuals as this may trigger questions with respect to their treatment from a VAT/GST perspective.

Source: OECD analysis.

1.3.3. A sectoral typology based on VAT/GST relevant operational features

Sharing/gig economy activities are diverse and constantly evolving. The impact of these activities on VAT/GST policy and administration may be equally diverse and tax authorities’ policy responses may need to be tailored to take account of the specific features of sharing/gig economy activity. In structuring their policy analysis and design process, it may be helpful for tax authorities to categorize the main sharing/gig economy operators and/or sectors on the basis of a set of key operational features that are likely to be relevant from a VAT/GST perspective. Figure 1.3. below suggests such sectoral typology based on sharing/gig economy activities’ reliance on capital and/or labour (capital intensive vs. labour intensive) and on the mode of service delivery (digital or physical delivery). As will be discussed further in this report, these features are likely to be relevant for VAT/GST purposes, e.g. digitally delivered activities may be more likely to have cross-border aspects (could for instance be delivered remotely); capital-intensive activities may involve higher value transactions and actors that are more likely to have the capacity to comply with their tax/regulatory obligations.

Figure 1.3. A sectoral typology

Source: OECD (2019), An Introduction to Online Platforms and their Role in the Digital Transformation (OECD, 2019[8])

1.3.4. Broad VAT/GST opportunities

The growth of the sharing/gig economy can create opportunities to facilitate and enhance VAT/GST compliance and administration and offer potential to broaden the VAT/GST base. These opportunities arise in particular from the central role of a relatively limited number of sharing/gig economy platforms in stimulating and facilitating these activities through advanced technology and data analytics. The crucial role of big data and enhanced data analysis in the sharing/gig economy business models provides considerable opportunities for greater visibility and traceability of economic activity, for formalisation of previously informal economic activity, and for more efficient tax collection and compliance.

1.3.5. Broad VAT/GST challenges/risks

This section of the report discusses a number of VAT/GST challenges created or exacerbated by the growth of the sharing/gig economy. These challenges and risks may notably include the possible erosion of a jurisdiction’s VAT/GST base resulting from the shift in economic activity from a relatively small number of largely tax compliant long-established traditional businesses to large numbers of new relatively small business actors (incl. non-standard workers) that may often be less compliant and/or not be subject to taxation because their activity remains below a VAT/GST exemption threshold. In addition, the varying and ever-evolving business models and types of interactions between sharing/gig economy actors may often make it particularly challenging to determine the VAT/GST nature and status of these actors and their activities and to determine and implement a proper VAT/GST treatment.