New business models such as the digital economy create challenges for national tax authorities in terms of tackling tax fraud and evasion.
This initiative aims to strengthen the framework so tax authorities can better exchange information on taxpayers working in the digital economy. This will help ensure they report what they earn and pay adequate tax.
It will also create a more efficient tax environment so compliant businesses can benefit from the single market and sustain economic growth.
Type of act: Proposal for a directive
The phenomenon of digital platforms facilitating peer-to-peer sale of goods or services between users – including the “collaborative economy” or so-called “sharing” and “gig” economy – is growing rapidly.
Many different services can be accessed through digital platforms. Some examples include:
- accommodation services ( such as renting an apartment when going on holidays);
- transportation services (such as car sharing);
- food-related services (such as home delivery);
- household services (such as gardening or babysitting);
- professional services (such as accounting or legal services);
- collaborative finance services (such as crowd-funding).
While the emergence of these digital platforms can have strong positive effects on the economy, they also raise a number of issues, including making sure that participants selling goods or services via those platforms (platform sellers) are aware of and fully comply with their tax obligations.
Given the nature of these platforms – highly mobile, operating internationally and often with no real physical presence – it can be challenging for tax administrations to gain timely access or even detect relevant information on transactions carried out or income obtained through digital platforms. These developments present risks of distorting competition with traditional businesses and leading to taxable income not being reported, and having the potential of becoming a vehicle for the shadow economy.
There are concerns that some income obtained by platform sellers is not declared to the relevant tax authorities. A number of EU countries (e.g. Italy, France, Denmark or Estonia) have already introduced unilateral reporting measures requiring platforms to communicate to the tax authorities revenues received by platform sellers, while others are planning to introduce similar measures in the near future. However, it is also recognised that unilateral measures are inefficient, as enforcement of the rules proves difficult – if not impossible – in a flexible and remotely operated business model. Additionally, each (unilateral) approach may include different registration and compliance requirements. This may lead to different regulatory models between EU countries and Single Market fragmentation, with an inherent administrative burden for both platforms and users.