By Alfredo Collosa on 23 December 2020
The Covid-19 pandemic has produced an exponential increase in new forms of commercialization of goods and provision of services that make use of digital platforms, a situation that is altering the functioning of the transport, delivery and digital services markets, among others.
Digital platforms are one of the world’s largest digital work disruptions in recent years and have the potential to positively impact 540 million individuals worldwide and increase revenue by $2.7 trillion by 2025[1].
For this reason, the objective of this document is to highlight the relevance for the Tax Administrations (TAs) of having information on the operations that are carried out through the intervention of digital platforms.
In this sense, I make a synthesis of the main aspects of a recent OECD document that deals specifically with the subject, and then draft some reflections regarding the importance of such information for the TAs.
MODEL RULES FOR DIGITAL PLATFORMS TO REPORT OPERATIONS. (OECD).
On July 3 of this year, the OECD published the document entitled “Model Rules for Reporting by Platform operators with respect to Sellers in the sharing and gig economy”[2] which was previously approved by the Inclusive Framework of the OECD / G20 on BEPS.
The objective of the document is to help taxpayers meet their tax obligations, avoid the proliferation of different and unilateral reporting regimes, and also allow the use of novel ICT solutions helping to create a sustainable environment that supports the growth of the digital economy.
It should be noted that several jurisdictions have already introduced information measures that require platform operators to communicate to the TAs the income received by sellers or service providers, while others plan to introduce similar measures in the near future.
In this regard, Spain has established the obligation to present an informative statement for real estate rental platforms in which information about the lessors, the operation and the property must be provided. However, recently a court ruling has put an end to said regime, for the moment, without prejudice to which regulatory changes would be made for its reimplantation.[3]
Given this, the main objective of the OECD document is to find a multilateral solution to this issue. That is to say, that it should be adopted in a uniform way in the different countries, benefiting the TAs and taxpayers, all within a broader aspect that continues to seek consensus, such as the taxation of the digital economy and the fiscal transparency of the international tax system.
In general terms, the document is centralized in 3 aspects:
Regarding the subjects obliged to report, a broad and generic definition of the term platform has been chosen to cover all the software products that users can access and allow sellers to connect with other users to provide the relevant services, including arrangements for collecting the consideration on behalf of sellers.
Platform operators are defined as entities that hire vendors to make all or part of a platform available to said vendors and, in principle, are subject to providing the information when they are residents, incorporated or administered in the jurisdiction that adopts the rules. .
Optional exclusions are provided for operators of small-scale platforms, particularly targeting start-ups, and platforms that do not allow sellers to profit from the consideration received or do not have sellers to be informed.
In relation to the operations for which the information must be reported, it is clarified that both the rental of real estate, and the provision of personal services, including transportation and delivery services are included.
Regarding sellers, it covers both entities and individuals, although exclusions are provided for hotel companies, listed entities and government entities.
Elsewhere in the report, the due diligence procedures that platform operators must follow to identify vendors and determine relevant jurisdictions for reporting purposes are specified through the following steps:
At another point, the report establishes the rules to determine the link between vendors and jurisdictions for the purpose of reporting, based on the information elements collected.
Likewise, the information to be reported on the platform, its operators, its vendors and their transactions as of January 31 of each year is established, as well as the reporting format.
The main objective is to be complemented by an international legal framework to support the annual automatic exchange of information by the jurisdiction of residence of the platform operator with the jurisdictions of residence of the sellers and, with respect to transactions involving the rental of real property, the jurisdictions in which such real property is located, as determined based on due diligence procedures.
In addition, the OECD will continue to work to develop a standardized ICT format for information exchanges, as well as possible ICT solutions to support identity verification of vendors by platform operators.
Finally, they announce they will closely follow the evolution of the market in order to evaluate the need to incorporate other types of services, such as the rental of mobile assets and loans between individuals.
Additionally, several jurisdictions are interested in further developing reporting regimes to also include sales of goods.
Final reflections.
I think the recent OECD document is very important and healthy because digital business models through platforms will continue to grow exponentially and new digital models and contracts will also emerge.
On the side of the TAs, I am convinced that they will need to intensify international cooperation in order to more efficiently manage the taxpayers that carry out operations through these new business models.
On the side of the taxpayers who own digital platforms, the main advantage will be the simplification and standardization of information regimes, compared to the multiple regimes that many countries have already established.
I believe that it is very important for the TAs to have information on operations carried out through digital platforms, for the following reasons:
Because many of the activities carried out through platforms are not always communicated to the Tax Administrations, either by third parties or by the taxpayers themselves.
In order to identify all the intervening actors and thus determine the taxable events taxed and subject them to taxation in each of the countries involved. It is vital that the TAs have information on the agents and their economic activities.
To expand the tax bases by capturing taxable matter and / or taxpayers who remain hidden in this type of operation, especially in a crisis situation, such as the current one where resources are urgently needed.
For a matter of equity and equality with those activities that commercialize or provide services through traditional modalities, that is, to level the playing field.
Because of the importance of workers having due social protection, since today social protection systems are at the crossroads of how they should pay these new contracts; which can also lead to a greater lack of financing in our pension systems[4].
The information exchanged can also help detect and combat other non-tax crimes such as drug trafficking and money laundering.
Tax administrations may consider adapting their compliance strategies to reflect that an increasing number of taxpayers obtain taxable income through such platforms.
The information can also be used to better understand these new businesses by the TAs and thus be able to implement adequate control plans for the sectors involved.
Tax administrations can implement new cooperative / collaborative compliance approaches with the holders of digital platforms.
[1]Manyika, Lund, Robinson, Valentino y Dobbs (2015). A labor market that works: connecting talent with opportunity in the digital age. McKinsey Global Institute. [2]https://www.oecd.org/tax/exchange-of-tax-information/model-rules-for-reporting-by-platform-operators-with-respect-to-sellers-in-the-sharing-and- gig-economy. [3] https://www.prodespachos.com/noticias/la-agencia-tributaria-deja-de-exigir-el-modelo-de-informacion-fiscal-sobre-pisos-turisticos-tras-el-fallo-del-supremo/ [4] To expand this topic, see my article https://www.mercojuris.com/35634/trabajadores-de-plataformas-digitales-y-la-imperiosa-necesidad-de-su-proteccion-social-%E2%80%93-dr-alfredo-collosa/
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