The 'High-Level Expert Group on the Impact of
the Digital Transformation of EU Labour Markets', commissioned by the EU
Commission presented a report on this issue back in April 2019. Among other
things, it culminated in the proposal of a 'Digital Single Window' at EU level.
It has certain parallels with the 'Digital Social Security' (DSS) model,
proposed by Enzo Weber but also differs in some key aspects.
On the basis of the group's report, the EU
Commission had tasked researchers, Daisy Ogembo and Vili Lehdonvita from
Oxford, with studying the feasibility of the concept and making relevant
The starting point for the 'Oxford Report' is
the finding that platform workers are generally self-employed contractors and
therefore, their compliance with tax and social security obligations is
significantly lower than that of employees, for whom such deductions are made
at source. Moreover, platform workers often carry out several activities within
the same period, possibly in different forms of employment – not only in one
country but under the legal jurisdiction of several countries. Consequently,
their income may be taxable (or subject to social security contributions) in
multiple countries. The situation becomes even more complex if the platform is
located outside the EU.
The gaps in the collection of taxes and
contributions not only give unfair competitive advantages to companies using
platform work. They also produce a segment of the working population with
insufficient coverage in pension insurance and other branches of social
security. On the other hand, platform-mediated employment leaves a digital
footprint and thus, opportunities to support appropriate taxation and payment
of social security contributions.
Some EU Member States are trying to take advantage
of this opportunity by requesting income data for platform workers directly
from the platform operators. These countries include Estonia, Denmark and
France. Their experience is the starting point for more detailed investigations
The main purpose of the proposed Single Digital
Window is to avoid fragmentation of reporting obligations and their format,
specifically: The aim is to avoid a situation, where 28 (now 27) Member States
develop their own systems, formats and protocols to be followed by reporting
platforms, with these possibly even being differentiated by the various
recipient authorities. Whether all countries even have the resources to set up
such a structure themselves is doubtful. Nevertheless, a European digital
reporting system could simplify these reporting obligations. Other functions
could even be considered, such as a collection agency, but this idea has not
been pursued further.
Firstly, the report emphasises that the design
of a digital reporting system depends on the purposes for which it is used: to
reduce compliance costs for platform workers and platforms? or to combat the
evasion of tax and other duties and thus, an extension of the tools available
to the collection agencies?
There is also the question of experience with
potential obstacles: are they technical, legal or administrative in nature? One
of the arguments put forward against greater involvement of the platforms is
that this could give platform workers employee status.
Data protection concerns are another problem,
creating stringent requirements on cross-border data exchanges, in particular.
Finally, the costs of introducing and operating an income reporting system must
also be considered. At the very least, these should not be greater than the
additional taxes and duties gained as a result of this process.
Probably the biggest problem is access to
income data held by platforms that are not registered in their own country. In
some cases, cross-border cooperation between tax authorities has proved successful,
as in the case of Denmark and the Netherlands. However, the report wants to go
a step further and proposes that the Member States should join forces, set up
joint structures and act together in respect of non-EU countries.
In all scenarios, the problem of processing the
income data obtained to determine the social security and pension contribution
liability and calculate its amount, especially where self-employed persons are
concerned, remains. On this point, the report blatantly criticises the often complex
rules on social security for the self-employed, which it alleges are not
tailored to cases of platform work. It is often more difficult to collect
income data for social security purposes than for tax purposes, but this is not
explained in any more detail.
As far as the technical problems are concerned,
it is clear these are closely related to data protection regulations to some
extent. This has an impact on identifying the platform workers. Some Member
States such as Estonia have a single 'number' for all purposes. Germany, on the
other hand, would be much more challenging in this respect - with additional
administrative costs. Moreover, to avoid breaching the limits of data
protection legislation, additional information would be needed, more than mere
knowledge of the flow of money. For example, where the platform worker is
resident (state(s)) – has/have the right of taxation (and the right to levy
social security contributions).
Therefore, the nature and quality of the data
required for a common digital reporting system is a key issue that needs to be
addressed. Another critical issue remains the 'timing' of the data to be
transmitted so that it is available to the competent authorities in a timely
manner for the relevant accounting period.
What would the next steps be at European level?
First, Member States and the tax authorities would need to agree on the main
objective of a single digital reporting system: To simplify the participation
and compliance costs of platforms and the people working through them, or to
maximise tax and social security revenue? The former is likely to be at the
expense of accuracy and the latter at the expense of simplicity and ease of
A further step would be a European directive
obliging web-based platforms to provide relevant income data.
Even then, implementation problems remain: Who
enforces the obligations in cross-border cases and by what means? By blocking
the website if the rules are not followed, for instance? This question becomes
particularly relevant if the platform is based in a non-EU country. Finally,
the need to adapt the European data protection rules would also have to be
The report - but not this article for reasons
of space - elaborates on two alternative models for setting up a uniform digital
reporting system. In short:
The first option would be a decentralised
network in which tax authorities of Member States cooperate with each other.
This model is already used today for cross-border VAT and income taxation. The
second model uses a central agency ("hub and spoke model"), which
would be appointed by the Member States. The platforms would then be required
to transmit all income data to said agency, which would forward it to the
relevant authorities within the Member States. Such a system would be new in
Europe. This would be the more appropriate model from the point of view of
including platforms from non-EU countries. Most importantly, however, according
to the authors of the report, the central agency could process the data in such
a way that it meets the needs of the recipient country.
The authors of the report advocate the second
option, a centralised system, and propose a pilot project on a voluntary basis,
with core states being Denmark and Estonia. In a further step, legal foundations
could then be created at European level to make the system mandatory for
platform operators and workers. However, use of the system by Member States'
tax and social security authorities is voluntary. Another option would be to
entrust a European institution to act as the central agency, such as the newly
established European Labour Authority. However, this would require a further
legal basis at European level.
The report should be regarded as positive as it
also looks at the collection of social security contributions. The EU
Commission should continue to pursue the concept of a 'single digital reporting
system'. However, there are still many hurdles to be overcome before it can be
introduced, and above all, it will be important that the income data determined
in this way can also be used in a meaningful way from the point of view of the
German social insurance institutions.