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IMF Peer-to-Peer tax proposals

  • Sep 2, 2017 | Richard Asquith

IMF Peer-to-Peer tax proposals

The International Monetary Fund has rejected calls for a rethink of taxation principles for the digital, Peer-to-Peer (P2P) economy.  Instead, it suggests that any changes required to adapt to the burgeoning trade in the sector should come at the administrative level.

P2P threatens governments' tax base

P2P transactions are the selling and buying of goods or services between individuals without the use of companies or other third parties. The sector has expanded exponentially in recent years due to online market places and digital intermediaries. Examples include: Airbnb home rentals; eBay goods retailing; and Uber ride sharing.

The IMF paper published at the start of August reviewed the implications of this growth, and whether new taxation principles should be adopted. In particular, since the actors in the transaction fall outside of the established regulatory and taxation models, whether tax income is being missed and ‘compliant’ providers are being undermined. This could include preferential thresholds (e.g. VAT threshold) and reliefs (e.g. Income Tax relief) made available to individuals which displaces activities which are generating significant tax revenues.

The IMF concluded that the challenges were in the administration of the such new markets. The behaviour of actors in P2P transactions was similar to established parties in more mature markets, including the under or non-reporting of taxable income.

Marketplaces assisting with tax collections

The IMF did suggest that the online platforms which have empowered P2P’s growth may hold the answers to collecting tax.  The platforms’ operators have ready access to transactional data of their users which, subject to privacy laws, could be provided to the tax authorities.  Although the IMF questioned whether income withholding taxes could work.

Some platforms have already begun to collect some P2P taxes. For example, Airbnb is now collecting Occupancy Taxes of its hosts, and then remitting them to directly to the tax authorities in some US states and European cities.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara