Standardised reporting and cross-border exchange of information would help

Dr. S-W – 03/2020

The growth of the gig economy poses new challenges for tax administrations, especially for transactions between parties in several countries. Assumedly, many self-employed gig workers do not regularly report their platform income to the tax authorities. However, the gig economy can also provide opportunities in terms of collecting taxes and social security contributions. Transactions and related payments take place in electronic form, which can increase transparency and reduce the compliance burden for taxpayers and administrations.

Against this background, both the EU Commission and the OECD have launched initiatives to establish standardised reporting obligations on platform operators, as well as the basis for the cross-border exchange of information between tax administrations. In addition, the OECD specifically highlights the option of also making the new procedures available to social security.

The OECD has presented its recommendations as part of a public consultation on ‘Model Rules for Reporting for Platform Operators with respect to Sellers in the Sharing and Gig Economy’ launched on 19 February. The consultation document is available here.

The EU Commission launched a very similar initiative on 7 February with an Inception Impact Assessment of a ‘Proposal for a Council Directive amending Directive 2011/16/EU as regards measures to strengthen the exchange of information framework in the field of taxation’. The document can be downloaded here.

The aim of the Commission initiative is to improve cooperation between national tax authorities, while avoiding unilateral reporting rules at Member State level. Similar to the OECD proposal, this would be underpinned by EU-wide standardised reporting rules for platforms. The Commission’s preference is to adapt Directive 2011/16 as a means of achieving this, including addressing the question of whether only platforms located in the EU should be covered or all platforms worldwide.

The Commission has announced that it will consult national tax authorities starting in February. In addition, the Commission will organise a high-level stakeholder consultation in April as part of its conference on ‘Tax Compliance in a Digitalised World’.

The German Social Insurance welcomes the OECD initiative. In order to improve social protection, income from self-employment should be subject to compulsory insurance in Germany as soon as possible. This also applies to income generated via electronic platforms, even if this is often only secondary income. The reporting rules proposed by the OECD would be an important way of detecting deliberate or unintentional failure to pay social security contributions. The proposal to also use the data for social security purposes is therefore highly relevant in Germany and should be pursued further.

The comments of the German Social Insurance can be read here.