The OECD is starting to design model rules governments can adopt to ensure sharing and gig economy platform operators report seller details in a consistent manner to tax administrations — and is asking for input.
In a consultation document published February 19, the OECD said it is looking for input on one of the three building blocks of the model rules, which will provide a standardized approach for platform operators to collect data on transactions and income that sellers realize while using those platforms. The consultation focuses on the first building block, comprising model rules and commentary that governments can adopt domestically to get data from platform operators in their jurisdictions.
After working on those model rules and commentary, the document says that the OECD intends to focus on the two other building blocks: development of a framework for jurisdictions to automatically exchange data collected under the rules, and development of technical approaches to support data exchange and platform operators’ due diligence.
The consultation document follows up on a March 2019 report by the OECD’s Forum on Tax Administration, “The Sharing and Gig Economy: Effective Taxation of Platform Sellers.” That report examined how tax administrations can collaborate on approaches to address the tax concerns that arise from the growth of the sharing and gig economy.
Some approaches include effectively taxing platform sellers and obtaining information about those sellers from platforms whose operations are cross-border in nature but lack a physical presence in the jurisdictions where their services are used.
“Certain activities carried out through these platforms may not always be visible to tax administrations or self-reported by taxpayers,” the document says.
The rise of the gig economy in particular poses challenges because individuals are providing services through platforms on an independent basis and are not usually subject to third-party reporting, according to the document. “These developments present risks of distorting competition with traditional businesses and reducing declared taxable income,” it adds.
The OECD has asked for input on several elements of the proposed model rules and commentary, including the definition and scope of platform operators that would be obliged to follow the rules.
The consultation document proposes that the term “platform” should apply to “all software products that are accessible by users and allow sellers to be connected to other users for the provision of relevant services.” These also comprise payment services, the document says. An entity is considered a platform operator if it contracts with sellers “to make available all or part of a platform to such sellers," the document says, noting that several entities could be considered platform operators regarding the same platform.
“This would, for instance, be the case when one entity contracts with sellers for providing access to the software application, whereas another entity contracts with the same seller for the provision of payment collection services,” the document says.
The term “relevant service” would cover the rental of immovable property or a personal service for which a seller receives compensation.
The proposed rules would also exclude some types of platform operators, such as start-ups that are incorporated or established fewer than 36 months before the first day of a reportable period and that have revenue of less than €100,000 in their latest accounting period.
Another potential carveout would be for large commercial businesses, which would be considered excluded sellers under the proposed rules. These are sellers such as hotels that facilitate more than 2,000 immovable property rental transactions related to a property listing.
The document also calls for input about due diligence procedures that a reporting platform operator must do under the proposed rules. These include collecting seller information, such as full name, primary address, and date of birth; verifying that data; and determining a seller’s tax residence jurisdiction. Platform operators would have to complete their due diligence procedures by the end of each year, according to the document.
Moreover, platform operators would be obliged to report such information as seller consideration and other compensation on a cash basis and the jurisdictions in which a seller is tax resident.
The OECD is seeking feedback about administration and enforcement. Jurisdictions that adopt the model rules could require platform operators to either close or freeze a seller account if the seller doesn’t comply with its reporting obligations in a timely manner. A jurisdiction could also slap fines or other penalties on a noncompliant platform operator.
Aside from consulting on the model rules, the OECD wants input on creating a code of conduct to ensure taxpayer education and greater cooperation between platform operators and tax administrations in their residence jurisdictions. The code would supplement the model rules, according to the OECD.
The code could include an obligation for the platform operator to establish a strategy for cooperating with tax administrations “to help sellers understand their tax obligations, to assist them in reporting taxable income, and to facilitate reporting of information to the tax administration where required by law.” It could also oblige tax administrations to post information on their websites to help sellers understand if they are liable to pay tax in their jurisdictions, the document says.
The consultation closes March 20.