On 3 July 2020 the OECD published Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy. This follows a consultation on draft proposals earlier in the year.
The growth of online platforms that bring together freelancers with firms needing their labour is changing the way certain business sectors operate. More taxpayers are earning money through transactions in the gig and sharing economies that are facilitated by online platforms; and tax administrations need to adapt their compliance strategies to ensure that taxable income earned through the platforms is reported correctly.
A potential advantage for tax administrations is that transactions that were previously part of the informal cash economy have been brought onto digital platforms, where transactions and payments are recorded. However transactions that are not subject to third party reporting or tax deduction at source may not be self-reported by the individuals providing their services on an independent basis on these platforms.
Some countries have introduced measures for platform operators to make a report to the tax authorities on the revenues received by sellers on their platforms. However transactions in the gig and sharing economies are on a global scale and domestic reporting rules may be of limited effect where the platform operator is not located in the relevant jurisdiction. The platforms themselves may be confronted by a number of different domestic reporting systems that could give rise to high compliance costs.
The model rules aim to standardise measures adopted by each country to collect information on income earned by platform sellers and thereby prevent a proliferation of unilateral domestic rules that could cause compliance costs to spiral. The standardisation of rules will make it easier for jurisdictions to agree on automatic exchange of information in this area.
The rules define the scope of the transactions to be reported; include a broad definition of platform operators and sellers, to ensure that as many transactions are reported as possible; and set out due diligence and reporting rules to ensure that accurate information is reported without an undue compliance burden on the platform operators.
Each platform operator must report to the tax authorities of its jurisdiction of residence. The competent authorities of that jurisdiction would then exchange the information with its treaty partner jurisdictions if the relevant transactions involve sellers resident in the other jurisdiction or immovable property located there.
The rules are primarily intended to ensure that sellers are complying with their direct tax obligations, but the information obtained by tax authorities may also be relevant for other taxes such as value added tax (VAT) and goods and services tax (GST). Information shared would be subject to confidentiality and appropriate use provisions in the relevant bilateral or international agreements.
The OECD considers that due diligence procedures could be assisted by the introduction of new technical solutions. Procedures are already used in some countries to confirm the identity and tax residence of sellers by employing a government verification service. Using this service the identity and residence of the taxpayer could be confirmed by an electronic procedure.
