The Nordic countries are in the process of adapting their tax systems to the growing sharing economy. The Nordic Council of Ministers invited a group of experts from ministries and tax authorities to share their experience on how to tackle the challenges posed by the new platform economy.
The Nordic welfare societies all have strong ambitions to provide broad and high quality social services. To fulfil these ambitions, solid public revenues are necessary. This is a challenge if the new and growing digitalized business models of our economies are more difficult to tax.
The sharing economy’s platforms such as Uber, Airbnb etc. do not fit into the taxation systems designed for the industrial economy of the past. These are not companies selling products, but rather intermediaries providing peer-to-peer exchanges.
It is difficult for tax authorities to obtain accurate information of income from the sharing economy. Several tax bases are more mobile now due to, among other factors, digitalization of the economy. Also, a lack of information on revenues and more complicated deduction rules may cause the current system of automated self-assessment tax return to become more complex. The current tax systems are simply outdated – they were not designed for the sharing economy.
The Nordic experts debated in what way tax systems and regulation should be adapted in order to promote sharing economy without distorting competition among actors.
Furthermore, they also discussed whether to define revenue from sharing services as employment income or business revenue. The choice determines which rules apply and which requirements, such as social security contributions, to be imposed on actors.
Some believe that actors of the sharing economy are not paying enough taxes and that there is a risk that policies to promote the sharing economy can be exploited. To reduce the risk of tax-evasion, the need for third-party verification was stressed in several interventions. Others believe that the current tax systems constitute a barrier to the expansion of the sharing economy.
A growing proportion of service providers are private individuals, each with a relatively small turnover. Many European countries have already or are considering introducing limits implying that income up to a certain level will be exempt from taxation. As a result, sharing activities may be kept within these minimum limits resulting in a reduction in overall tax revenues.
- The Nordic countries face a similar set of challenges and there is an obvious scope for continued Nordic cooperation and information-sharing, said senior adviser from the Nordic Council of Ministers Björn Fritjofsson after the seminar.
The Secretariat of the Nordic Council of Ministers is ready to organize follow-up events, member countries find the most appropriate and valuable.