Time for the uber tax collector?

One of the knock-on effects of digital technology is that it’s pushing us away from traditional employment and towards a network of self-employed relationships – what is often referred to as the ‘gig economy’. Digital technology is especially adept at matching people to opportunities; from Uber drivers and Airbnb members to ebay traders, work isn’t what it used to be.

This shift in the employment model raises a question for HMRC. Until now, collecting (and policing) employment taxes has been the responsibility of employers. It’s a system that has worked well for just over 70 years.  Collecting taxes from self-employed internet entrepreneurs, though, is another task altogether.

For one thing, PAYE is relatively clear – you work, you earn X, you pay Y in taxes. Internet trading is less clear – for example, people must understand the line between buying and selling for personal use and commercial trading. If the current model continues, HMRC will increasingly have to rely on the efforts of a growing number of self-employed. 

So what can HMRC do? Buried deep in its Budget overview document is a clue – a small section called ‘tackling the hidden economy’. The section promises legislation that ‘will extend HMRC’s powers to acquire data from online intermediaries and electronic payment providers to find those operating in the hidden economy.’

The hint is that this may be about tax evasion, but I think it goes further. HMRC needs to find a new model for tax collection that mirrors the efficiency of PAYE – and asking the various service platforms to contribute to that looks like a potential option. They already collect lots of data from their members, so tracking what has been bought and sold, as well as expenses incurred, shouldn’t be too difficult.

In fact, this could become a real differentiator for these platforms. If their members are making money that money needs to be taxed; so why not make it as easy as possible for members to run their business? Why not make the financial information that members need available at the touch of a button, in a form that can be simply fed into a tax return? The alternative is for tax authorities to demand that these platforms withhold the tax that’s due from their members – not a practical solution for the platforms, nor an acceptable one for the users (for privacy reasons).

John Steveni | Communications Tax Leader
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