Opinion of the European Economic and Social Committee on ‘Taxation of the collaborative economy — reporting requirements’

(additional opinion)

(2020/C 364/09)

Rapporteur:

Ester VITALE

Bureau decision	18.6.2019
Legal basis	Rule 29 of the Implementing Provisions (2010)
	Additional opinion
Section responsible	Economic and Monetary Union and Economic and Social Cohesion
Adopted in section	24.6.2020
Adopted at plenary	16.7.2020
Plenary session No	553
Outcome of vote (for/against/abstentions)	210/1/6

1.   Conclusions and recommendations

1.1.

Taxation and tax policies must adapt to constant developments in the collaborative economy. In this respect, new or special tax regimes should not be developed and the EESC considers that it would be more appropriate to adapt current tax rules and models to the new economic situation, maintaining a level playing field for the various stakeholders.

1.2.

The EESC asks that national tax systems take account of the collaborative economy and digital platforms, upholding the principles of a fair tax system (i.e. consistency, predictability and neutrality) in this sector, while at the same time guaranteeing the public interest of all relevant parties’ discharging their tax obligations.

1.3.

The EESC believes that both tax policies applicable to the digitalisation of the economy and the devising of instruments and working solutions must be coordinated at international level. The EESC is therefore very pleased that the Commission, the Member States and the OECD/G20 are working together, recognising that the types of cooperation already in place have already produced tangible results and may produce further, more significant ones in future.

1.4.

International, European and national institutions must act effectively and rapidly in order to deal with the questions raised by the digital and collaborative economy, taking a proactive rather than a merely reactive approach to the emergence of specific issues.

1.5.

One issue crucial for the tax systems applicable to the collaborative economy is the obligations incumbent on digital platforms with regard to collecting, communicating to tax authorities and keeping information on transactions (reporting obligations). These obligations should not constitute an excessive administrative burden for platforms.

1.6.

Sharing information properly within a functional and proportionate system for collecting and exchanging data could make the work of tax authorities easier and establish a reliable and predictable system for businesses, which would be beneficial for the entire collaborative economy.

1.7.

The EESC calls for the development of a European standard for collecting the data and information on their own users that platforms will have to communicate to the tax authorities and keep. Reporting obligations should be clear and harmonised across the Member States. A European standard could limit unilateral action by Member States which creates a counterproductive patchwork of rules and uncertainty as to which rules apply in the internal market.

1.8.

As regards the broad principles which should steer regulatory action on reporting, the EESC considers that the approach adopted must abide by the proportionality principle, in accordance with EU Court of Justice case law, and thus make it possible to achieve the purpose of the regulation, i.e. gathering clear information which is useful for tax authorities, without excessive, undue sacrificing of the private interests of platforms and final users.

1.9.

The EESC considers that the tax rules relevant to the collaborative economy, including rules on reporting requirements, should constantly adapt to the various sectors and often differing activities of that economy.

1.10.

The EESC believes that it is important to consider whether the imminent implementation of the directive on certain requirements for payment service providers regarding requests for information with a view to identifying VAT fraud can also be used for the purposes of direct taxation in the context of reporting obligations.

1.11.

The exchange of information between private parties and public authorities must naturally comply with European legislation on the protection of privacy and the processing of individuals’ personal data, and meet the criteria of need, proportionality and strict interpretation of any waivers granted from the broad principles in the field of privacy for the purpose of enforcing tax rules.

2.   Introduction and broad principles

2.1.

Framing effective tax policies for the collaborative economy is a challenge both for European and national institutions and for operators in this sector. In this respect, it is vital to guarantee a level playing field between the various collaborative economy operators as well as between these operators and traditional operators active in the same sectors.

2.2.

The EESC considers that the collaborative economy has enjoyed continuous and strong growth in recent years and that it offers EU countries an opportunity for further development in the future as well, as it allows untapped resources to be mobilised and gives the initiative to individual people. At the same time, it recognises the need for regulation in order to protect consumers and safeguard workers’ rights, tax obligations and fair competition.

2.3.

The term ‘collaborative economy’ as used in this opinion refers to business models supported by collaborative platforms allowing the temporary use of goods or services which are often provided by private individuals. On this point, and with regard to methodology, a minimum consensus should be reached between the European Union and the Member States regarding the concept of ‘collaborative economy’, with a view to preventing significant disparities between the various definitions applied in the internal market.

2.4.

The collaborative economy is a complex economic entity which needs to be regulated as a whole, as it covers a range of social sectors and many different legal entities which have traditionally dealt with diverse, separate fields. For instance, the constant developments in the collaborative economy have an impact on the rules in the areas of consumer law, labour law, social security, contract law, the right to privacy and the law on public services.

2.5.

The EESC points out that national tax systems, coordinating effectively at European level, must take account of new models linked to the collaborative economy. The principles of a fair tax system (i.e. consistency, predictability and neutrality) for these new models need to be upheld in everyone’s interest: public authorities, businesses and consumers.

2.6.

However, traditional tax rules are struggling to adapt to the constant changes in technology, and tax rules often lag behind the digital economy, which is developing extremely quickly. Action by the European legislator and the various national legislators therefore needs to be coordinated to achieve specific and appropriate adaptation of the conventional rules and principles to these changes.

2.7.

International, European and national institutions must act in a timely, effective and coordinated manner in order to deal with the new questions raised by the digital and collaborative economy, taking a proactive rather than a merely reactive approach to the emergence of specific issues.

2.8.

The EESC firmly believes that with the digitalisation of the economy, tax policies and the devising of instruments and specific solutions must be coordinated at international or even global level. The EESC is therefore very pleased that the Commission, the Member States and the OECD/G20 are working together closely, recognising that this cooperation has already produced tangible results and may produce further, more significant results in future.

3.   Reporting obligations

3.1.

One issue crucial for the tax systems applicable to the collaborative economy is the obligations incumbent on digital platforms with regard to collecting, communicating to tax authorities and keeping information on transactions. Sharing information properly within a functional and proportionate system for collecting and exchanging data could make the work of tax authorities easier, as they would have quick and easy access to data, and establish a predictable system for platforms and their users. Reporting obligations should not constitute an excessive administrative burden on platforms and operators in this sector.

3.2.

There are already a number of examples of effective cooperation between platforms and tax authorities in the transport sector; Estonia, for instance, has adopted provisions to make it easier for drivers belonging to car pooling platforms to fill out their tax declarations. Estonia has also come up with another innovative solution: identifying a minimal and proportionate amount of data which has to be communicated to the authorities and enabling platform operators to have a dedicated current account for paying taxes. This current account promotes direct and rapid communication between operators, their banks and the tax authorities. On the other hand, in some regions online platforms have demonstrated a lack of willingness to work with the financial authorities.

3.3.

In this respect, the EESC calls for the development of a European standard for collecting the data and information that platforms will have to communicate to the tax authorities and keep. A plethora of unilateral action by Member States and a patchwork of regimes across the internal market — which is already happening to some extent — will create operational difficulties and a loss of efficiency for the whole collaborative economy sector.

3.4.

A harmonised European reporting model needs to be developed, drawing on practical experience and feedback. There are various reporting systems in place across the Member States which differ in terms of organisational arrangements and the quality and type of data collected and forwarded. In some Member States, these systems are very burdensome and the platforms have to go to considerable efforts, while other Member States have more flexible systems which have less impact on day-to-day operations. Experience in some Member States shows that optional, voluntary reporting systems which do not entail specific legal requirements do not work effectively.

3.5.

The EESC is of the view that the current fragmentation is not sustainable in the long term, as it could lead to excessive compliance costs and inefficiency linked to the patchwork of rules in place across the internal market. A balanced and proportionate approach to reporting must therefore be identified, guaranteeing a streamlined and functional system. Simplified reporting obligations could be an incentive for digital platforms to comply with the rules.

3.6.

As regards the broad principles which should steer regulatory action on taxation of the collaborative economy in general and reporting obligations in particular, the EESC considers that the approach adopted must abide by the proportionality principle, in accordance with EU Court of Justice case law. It will therefore be necessary to make it possible to achieve the purpose of the regulation, i.e. gathering clear information which is useful for tax authorities in the public interest, without excessive sacrificing of the private interests of platforms and final users.

3.7.

This approach should guarantee clear, predictable rules for sector operators, avoiding generating excessive compliance costs (for instance through unnecessary and disproportionate requests for data) while ensuring that tax authorities can collect information efficiently.

3.8.

A proportionate, reasonable reporting system should also identify which data, in terms of quality, are absolutely necessary and need to be collected in order to enforce tax rules, without placing excessive burdens on platforms and their professional users or final users. A proportionate approach should also make a distinction between professionals active in the collaborative economy and non-professional service-providers, adjusting the reporting obligations applicable to each category.

3.9.

Further aspects which should be subject to harmonised EU-wide regulation are: (i) the general conditions governing the lawfulness of processing by the data processor; (ii) the persons concerned by the processing; (iii) the entities involved and the purposes for which personal data may be disclosed; (iv) the specific methods of processing; (v) the limits on the purposes of processing; and (vi) how long data are kept.

3.10.

The exchange of information between private parties and public authorities must naturally comply with European legislation on the protection of privacy and the processing of individuals’ personal data, and meet the criteria of need, proportionality and strict interpretation of any waivers granted from the broad principles in the field of privacy for the purpose of enforcing tax rules.

3.11.

In this respect, it might also be useful to improve and encourage the exchange of information between national tax authorities as well, with a view to setting up effective forms of cooperation intended to prevent fraud and tax avoidance as well as to harmonise the working practices of the various authorities.

3.12.

Tax rules in the collaborative economy, including as regards reporting systems, should anyway be geared to the various sectors of the collaborative economy: the various activities involved in this sector are often varied and specific and so require specific, targeted rules.

3.13.

The EESC recommends that a level playing field be guaranteed anyway as regards taxation of activities carried out by means of the collaborative economy and similar traditional activities, in accordance with the principle of fiscal neutrality. The aim here is to avoid distortions in the operation of markets which combine conventional forms of activities and those performed via the collaborative economy.

3.14.

Lastly, identifying minimum thresholds below which certain activities are deemed not to be professional or not to be economically relevant and for which specific tax exemptions can therefore be granted might be useful for stimulating the growth of the collaborative economy. However, these thresholds must be reasonable, following an accurate legislative impact assessment.

4.   VAT and the collaborative economy

4.1.

For VAT purposes, it is crucial to define the concept of ‘taxable person’ precisely and understand whether the person in question is performing an economic activity. Furthermore, there is still no easy way to establish how to tax collaborative economy transactions in which remuneration is not made in money but which do involve some form of return, for instance based on the use of the users’ personal data and the mining of that data.

4.2.

More specifically, for VAT purposes, a distinction must be made between different situations concerning remuneration for services: (i) situations where services are rendered against payment of a sum of money; (ii) situations in which remuneration is provided not in money but in the form of another service or non-monetary remuneration; and (iii) situations in which the service is rendered freely with no return (1).

4.3.

As regards instances which could come under point (ii), the EESC calls for clarification on whether activities carried out by collaborative platforms are subject to VAT.

4.4.

On this subject, the EESC considers the European Commission’s VAT expert group’s work on VAT treatment of the sharing economy to be very useful and trusts that this issue will be developed further.

4.5.

The Commission and national tax administrations should also promote appropriate cooperation and mutual coordination with regard to applying VAT rules to the collaborative economy, with a view to developing harmonised working practices, exchanging information useful for enforcement procedures and preventing fraud and tax avoidance.

4.6.

The EESC believes that it is important to consider whether the imminent implementation of the directive on certain requirements for payment service providers regarding VAT fraud can also be used, in the context of reporting obligations, for the purposes of direct taxation either with regard to online credit card payments or to payments made by direct bank transfer and other forms of rapid payment.

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(1)  VAT expert group, meeting — 1 April 2019 taxud.c.1(2019)2026442 — EN, VAT Treatment of the sharing economy, VEG 081.