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UK seeks input on VAT challenge that sharing economy creates

by Jonathan Adams
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The UK’s economic and finance ministry notes that a number of sharing economy platforms seem to take on many of the jobs of a traditional principal without taking on the related VAT liability

The United Kingdom’s economic and finance ministry, HM Treasury, seeks input on the challenges that the sharing economy creates for value-added tax (VAT).

In a document titled “VAT and the Sharing Economy: Call for Evidence,” the ministry notes that a number of sharing economy platforms seem to take on many of the jobs of a traditional principal without taking on the related VAT liability. That is because the underlying service provider supplies the ultimate consumer.

This gives rise to the question of the extent to which the digital platforms benefit from an unintended competitive advantage over many traditional, VAT-registered businesses which must charge VAT on their supplies, the ministry said in the report. Comments will be accepted through March 3, 2021.

The ministry said that policymakers have to consider the basis for new regulations that mirror the evolving nature of economic activity in the digital era. If that does not occur, a sizable risk exists. There will be rising market concentration among large platforms that are often known internationally and have much control over underlying service providers.

Our assessment of these challenges and risks should involve carefully developing and establishing a clear set of criteria that enable us to determine responsibility for VAT on services to consumers, based on an up-to-date understanding of the reality of economic scale and control in the modern economy, the ministry said in the report.

The ministry acknowledged in its report that there is not a single definition that can describe the sharing economy. Estimates of the sharing economy depend upon the breadth of definitions that are utilized, it says.

However, the ministry notes that available information indicates that the sharing economy has expanded quickly throughout the globe, and it is predicted to keep doing so.



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