Department of Economics

How to regulate and tax the sharing economy

A Norwegian government committee looking at the sharing economy proposes that sharing platforms such as Uber, Airbnb and others should be subject to regulations and taxation.

Photo of a taxi, used to accompany a news article about the so-called sharing economy.
DEREGULATION SUGGESTED: One of the proposals from a Norwegian government committee on the sharing economy is to deregulate the taxi market and make it easier for new entrants to compete.

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Professor Tommy Staahl Gabrielsen from the University of Bergen (UiB) chaired the Sharing Economy Committee, which presented its report on 06 February 2017. Gabrielsen teaches at UiB’s Department of Economics and is also head of the Bergen Centre for Competition Law and Economics (BECCLE).

The sharing economy holds promise

In its mandate, the committee was asked to evaluate opportunities and challenges presented by the sharing economy. The committee was tasked with identifying and assessing regulatory provisions challenged by the sharing economy, including regulations in markets in which the sharing economy is particularly prominent.

A further priority identified in the mandate, was the labour-market consequences of the sharing economy. Finally, the committee was requested to consider consumer protection rules and the objective of consumer safety. The committee concentrated particularly on new taxi and small-scale passenger transport services and the accommodation market, but also examined a number of tax issues.

“One of our conclusions was that the sharing economy holds promise for the Norwegian economy, not least in terms of boosting competition, innovation and consumer choice. Sharing economy companies can potentially improve the resource utilisation and thereby free up resources for other socially beneficial purposes,” says Gabrielsen.

Creating clarity in an altered economy

Among the big names in the sharing economy are the transport services Uber, Lyft and Haxi and the accommodation service Airbnb. The services provided by companies such as Uber or Haxi have so far been unclear as part of existing Norwegian law, something which the committee’s report seeks to address.

“For instance, the legal state in the passenger transport sector is still largely unsettled. This is unacceptable to both customers and service providers,” says Gabrielsen about this state of affairs.

One of the main proposals of the committee is that an information portal be established to provide consumers, platforms and service providers with information on rights and obligations in the sharing economy.

Opening the market to new actors

The regulation of the passenger transport market prevents the entry of new actors, who provide alternative business models. This hinders competition and is costly for society as a whole, according to the committee’s majority.

“This is why we propose to abolish today’s taxi permit requirements and the associated needs testing. We suggest new regulations to safeguard the customers’ needs for security and price information as well as compulsory reporting of earnings to the tax authorities,” says Gabrielsen.

The committee also believes that taxation of income in the sharing economy appears unclear and complex, and that the tax authorities’ control of income needs strengthening.

Clarifying boundaries and taxation

An important recommendation is that a disclosure duty should be introduced for data-holders who enable or facilitate rentals or paid services via digital platforms.

The Norwegian Tax Administration should maintain and develop guidance that clarifies the rules on taxes relevant to participants in the sharing economy. Also, digital technology should be used for reporting, control and guidance functions. The committee also believes that consideration should be given to simplified tax treatment of small incomes from services, including service provision that would not otherwise be taxed.

A majority of the committee also proposes that income from short-term rental of a private residence be made taxable. Such incomes are currently tax-exempt if the rental income amounts to less than half of the rental value of the property.

“Short-term rental of homes leads to changes in the labour market and how this is accommodated. The committee’s majority believes that continued tax exemption for this type of house lettings may create distortions in the labour market that are detrimental to society,” says Gabrielsen.