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The sharing economy expands the tax base

sharing economyThe sharing economy has disrupted the traditional taxi, hospitality and other sectors, and is expanding the tax base available to governments and revenue agencies worldwide.

What is the sharing economy?

The sharing economy refers to the sharing of goods or services, free or for a charge, using the Internet. In the taxi industry, ride sharing platforms like Uber compete with government-licensed taxis, causing the value of a taxi licence to plummet by hundreds of thousands of dollars in some instances. Airbnb competes with traditional providers of hotel and other accommodation. But the flipside is that millions of individuals can more can easily establish businesses, contribute to the Gross Domestic Product and, potentially, the tax base.

Guidance from revenue agencies

A significant number of individuals are not aware that income from the (often informal) sharing economy is taxable. Increasingly, revenue agencies like the Canada Revenue Agency (CRA) are focusing on taxpayer compliance within the sharing economy. CRA’s website identifies 5 key sectors of the sharing economy: accommodation sharing, ride sharing, music and video streaming, online staffing, and peer/crowd funding.

In a section of its website entitled “Involved in the sharing economy? Know your tax obligations!”, the CRA warns:

If you are an individual or a business participating in the sharing economy, you must report all the income you earn through sharing-economy activities. You must also meet your goods and services tax/harmonized sales tax (GST/HST) reporting and remittance requirements.

The CRA website also includes detailed guidance on tax obligations and compliance for accommodation sharing, one of the 5 key sectors identified above.

Other revenue agencies have also focused on the sharing economy:

  • The Internal Revenue Services in the United States provides very detailed guidance here.
  • HM Revenue and Customs in the United Kingdom offers guidance here.
  • The Australian Taxation Office also provides guidance here.

The ride sharing economy and the Federal Budget 2017

The sharing economy has also come under scrutiny in the Canadian Federal Budget 2017 (the “Budget”). The Budget includes a proposal that effective July 1, 2017, the definition of taxi services be amended to include ride sharing services. As a result, ride sharing services, like traditional taxi services, would be excluded from the “small supplier exemption” for GST/HST registration and remittance. Consequently, ride sharing services, like traditional taxi services, would be subject to GST/HST on all fares regardless of the taxpayer’s total annual sales — the $30,000.00 small business exemption from registering and collecting GST/HST would no longer apply to ride sharing services.

Apolone Gentles, JD, CPA,CGA, FCCA, Bsc (Hons)

Apolone Gentles is a CPA,CGA and Ontario lawyer and editor with over 20 years of business experience. Apolone is leveraging 20 years of business and accounting experience to build a commercial litigation practice with an emphasis on construction law. She has held senior leadership roles in non-profit organizations, leading finance, human resources, information technology and facilities teams. She has also held senior roles in audit and assurance services at a “Big Four” audit firm. Apolone has also lectured in Auditing, Economics and Business at post-secondary schools. Read more here

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