The IMF (International Monetary Fund) has concluded in its recent Working Paper: Taxation and the Peer-to-Peer Economy that as the P2P economy continues to grow, thanks largely to improvements in technology, it has become an increasingly attractive option for users to make a living.
Facets of the P2P economy now seep into everyday functions and it is becoming increasingly important for governments to understand how to mobilise revenue from this sector. Whilst a definitive approach is not immediately obvious, governments will need to decide if they want to minimise taxation differences between traditional and P2P businesses or differentiate between them through the tax system if one is preferred over the other.
The emergence of P2P activities does not currently seem to be driving a radical rethink of the tax system or the principles upon which it is based. The growth in P2P sellers and subsequently the number of unincorporated small businesses is increasing at the lower end of the gross income distribution and these businesses may well displace larger firms and reinforce existing well-known challenges for taxing large numbers of small businesses.
Generally speaking, platforms closely guard data on users and incomes and short of ordering disclosure, many government agencies are seeking to develop other methods to estimate the value added by P2P activity to their economies. The Office of National Statistics in the United Kingdom is currently considering how to measure the contribution of the P2P economy to UK GDP more accurately and perhaps more importantly how to effectively tax it.
Both stock markets and policymakers have been captivated by the growth of the P2P economy over the last 10 years, whilst the emergence of digital platforms and indeed direct digital currency transactions between buyers and sellers, the tax behaviours of the actual individuals are actually very familiar. The technology behind P2P platforms now presents a valuable opportunity to solve the problems of how to choose tax bases and how to set tax thresholds.
This story was originally posted on VAT Life, Quipsounds quarterly newsletter in association with Essentia Global Services. Click here to see the story and more on VAT Life.