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Inland Revenue

Tax Policy

Chapter 2 – The gig and sharing economy

2.1 The gig and sharing economy generates economic benefits, providing consumers with a wider range of services and sellers with opportunities for work that is flexible and accessible.

2.2 However, the gig and sharing economy business model does not fit neatly within existing tax rules and administration which can be to the detriment of the seller, to the tax base and to the economy. This chapter considers these issues.

2.3 This discussion document seeks to address these issues and ensure that existing tax settings appropriately cater to the gig and sharing economy in New Zealand. This chapter outlines options to address the identified issues. The options draw heavily on work by the OECD on taxation and information collection and exchange in the gig and sharing economy.

2.4 Addressing the issues identified is a crucial step in maintaining the social licence of the gig and sharing economy so that it can continue to develop and support New Zealand’s economy into the future.

Making it easier to comply with income tax obligations

2.5 A key issue with the current tax settings is that they do not support sellers to comply with their income tax obligations. Many academic authors have commented on the tax compliance challenges facing sellers in the gig and sharing economy.[1] These authors have also expressed concern about the lack of data available in this area. To better understand the challenges they face, tax authorities throughout the OECD are taking steps to improve data collection. For example, a 2017 study prepared for Her Majesty’s Revenue and Customs revealed a lack of understanding on the part of sellers earning income through the United Kingdom gig and sharing economy about their tax obligations.

2.6 People participating in the gig economy can often be sole operators with little experience in business practices. The gig and sharing economy enables people to access paid work with relative ease. In most cases, simply signing up to a digital platform connects the seller with customers and potential revenue flows. However, once the seller is established on a digital platform, this initial simplicity can give way to complexity. This is because tax obligations remain the responsibility of individual sellers who will, to remain compliant with their tax obligations, need to keep records and set aside some of their earnings in anticipation of a future tax bill.

2.7 Those who earn income through digital platforms in the gig and sharing economy have different obligations to those who earn income from investments and through employment, as investment income payers and employers have obligations to provide Inland Revenue with income information (and withhold tax) which reduces compliance costs for these taxpayers, as they do not have to keep records and save for anticipated tax liabilities.

2.8 New Zealand’s administration of income tax means that a substantial proportion of individuals – wage and salary earners – do not need to prepare or file income tax returns. Instead, their income tax obligations are largely dealt with by withholding taxes through their employer (PAYE), bank (RWT), or KiwiSaver fund (PIE rules). These third parties also provide a significant amount of information to Inland Revenue which is then used to pre-populate income tax returns. These rules are designed so that individuals do not have to be experts on tax law and preparing tax returns.

2.9 As a result, most individuals do not typically need to access software products, accountants or other tax advisors who assist individuals in managing their tax affairs. Many of those who enter the gig and sharing economy may therefore have no, or limited, prior experience of managing their tax obligations outside of being an employee; their participation in the gig and sharing economy will be the first time the obligation to apply more complex rules falls on them.

2.10 Internationally, there are hundreds of thousands of sellers engaged in the gig and sharing economy. These sellers are linked directly to digital platforms that collate detailed information on their activities. There is a clear opportunity therefore to improve Inland Revenue’s visibility of income information held by digital platforms, which could be used to encourage sellers to comply with their tax obligations. Doing so would support the social licence of the gig and sharing economy in New Zealand.

Improving fairness between similar service providers

2.11 Another issue with the current tax settings is that they do not always promote fairness between sellers in the gig and sharing economy and traditional suppliers. This is because the current rules do not create a level playing field between traditional suppliers and sellers operating in the gig and sharing economy. In this discussion document therefore, fairness refers to traditional suppliers and sellers in the gig and sharing economy facing similar GST rules.

2.12 New Zealand’s goods and services tax (GST) is a broad-based tax on the supply of goods and services in New Zealand. A comprehensive GST ensures that businesses face the same cost and pricing considerations as each other. This is important for maintaining fairness. However, the GST system recognises that imposing GST obligations on businesses increases their compliance costs. Hence suppliers are not required to register for GST if the value of their supplies made in a 12-month period is expected to be less than $60,000. This registration threshold generally strikes the correct balance between the compliance costs of smaller operators and maintaining fairness between suppliers by reducing competitive distortions.

2.13 Many sellers in the gig and sharing economy will not exceed the $60,000 registration threshold for GST. However, their sales will be charged and collected by a smaller number of digital platforms which collectively facilitate millions of sales of services in New Zealand. While GST is effectively collected on a portion of these sales by non-resident platforms under the remote services rules,[2] those who receive services facilitated by digital platforms in the gig and sharing economy are not generally subject to GST themselves.

2.14 The current tax rules do not create a level playing field between gig and sharing economy sellers and their more traditional counterparts. While most sellers on digital platforms are not required to charge GST, competing suppliers such as taxi drivers, hotels and motels are generally charging GST. For example, taxi companies often require their drivers to register for GST regardless of whether they meet the registration threshold, as many of their clientele will be registered for GST and will expect to claim a GST refund for their taxi rides.

2.15 When considering the gig and sharing economy collectively then, the competitive distortions resulting from the $60,000 threshold applying become more concerning. As the gig and sharing economy continues to grow and more people start to earn income through digital platforms, there is a risk that this type of business model could erode the GST base. There is a question therefore of whether the GST registration threshold strikes the right balance in the context of the gig and sharing economy.

Developing solutions that involve digital platforms

2.16 Many digital platforms are aware of the need to address issues related to tax compliance and fairness in the gig and sharing economy. At the international level they have shown a willingness to engage with jurisdictions to achieve practical outcomes, including those that will improve sellers’ compliance with their income tax obligations and improve fairness in the GST system.

2.17 Digital platforms have a significant amount of information about sellers that is useful in a tax context. This is because a large part of their business is facilitating transactions between buyers and sellers on their marketplace. There is scope therefore to involve them in measures to increase tax compliance and fairness in the gig and sharing economy.

2.18 Unlike traditional suppliers however, digital platforms often operate in many countries with differing tax rules and regulatory requirements. Some digital platforms are start-ups which are initially focused on improving their technology and growing their user-base, and they do not necessarily consider the tax implications of their business model until it has proven to be successful.

2.19 These issues may make it difficult for regulators to successfully impose new obligations on digital platforms, particularly if they are jurisdiction specific. If the compliance costs of meeting new regulations are too onerous for digital platforms, some may withdraw from the jurisdiction in question, or simply not comply with the new regulation.

2.20 An internationally agreed set of rules will help promote standardisation across the sector, which should result in lower compliance costs for digital platforms. This is what the OECD have sought to develop with their model rules (discussed in detail in chapter 3).

Other jurisdictions are also addressing these challenges

2.21 The Canadian Government introduced rules to deal with the expanding gig and sharing economy. The value-added tax (VAT) registration threshold no longer applies to sellers providing ridesharing services, so sellers must register for, and charge, VAT on their services. Digital platforms that facilitate taxable supplies of short-term accommodation in Canada are now required to collect GST on supplies made by sellers who are not registered for VAT themselves.

2.22 In 2020, reforms were implemented in Mexico to support gig and sharing economy sellers to comply with their tax obligations. The main change was to place withholding and reporting obligations on gig and sharing economy platforms for income tax and VAT owed by the seller.

2.23 Under these rules, the platform is required to withhold VAT at a rate of 8%. The rate is reduced to half the standard rate because VAT deductions are not available to sellers for the costs they incur in producing taxable supplies. This means that sellers do not have to register and account for VAT themselves. To ensure that supplies made by sellers are not over-taxed, the platforms charge VAT at the standard rate of 16% and return the 8% not withheld to individual sellers as a proxy for their VAT deductions.

2.24 This approach decreases the accuracy of the tax assessment; however, it significantly reduces the compliance costs on sellers. In cases where the seller fails to provide their tax identification number (TIN) to the platform, VAT is withheld at the standard rate of 16% so that the seller is effectively denied any VAT deductions.

2.25 The withholding rate for income tax varies depending on the earnings of the individual supplier. A higher rate is also imposed on sellers who fail to provide their TIN.

2.26 In July 2021, the United Kingdom Government released a summary of responses to a call for evidence on the VAT challenges created by the growth of the gig and sharing economy. The evidence obtained will be used by them to further develop their understanding of the gig and sharing economy and the potential case for reform to VAT.

2.27 The United Kingdom Government will implement the OECD model rules from January 2023. They have released a consultation document seeking views on the optional elements of the rules. The consultation closed on 22 October 2021.

2.28 The Australian Government currently collects data from ridesharing and accommodation sharing platforms that operate in Australia. A ridesharing data matching programme has been in place since 2015. Data is provided by platforms to the Australian Taxation Office (ATO) and used to identify individual sellers. Once identified, the ATO can support these sellers to meet their income tax and GST obligations. Where necessary, compliance action may be initiated based on the data collected. The GST registration threshold does not apply to ridesharing (or taxi) drivers, who are required to register for GST.

2.29 The Australian Government has also invited submissions on a proposed reporting regime for sharing economy platform providers. The reporting regime is separate to that proposed by the OECD. It would require platforms that allow buyers and sellers to transact electronically to report information on all transactions for services or the sharing and loaning of assets (unless an exemption applies). It would be mandatory to report information identifying the seller such as their Australian Business Number, and information about transactions in the reporting period such as total gross payments to the seller and GST attributable to them. Reporting would initially be required on a biannual basis.

2.30 France has also imposed information sharing requirements on digital platforms whose sellers provide services or carry out sales in France. The digital platform is required to provide sellers with a summary of the transactions carried out by them for the given year. This information must also be passed to the tax authorities on an annual basis. The required information includes identification details of the seller, the number and value of transactions carried out by them that year, and the bank account into which the income is paid. The digital platform may incur a fine if they do not provide the necessary information in a timely manner.

2.31 In India, digital platforms facilitating ridesharing and food delivery services are liable to collect and remit GST on the supplies made by sellers operating on their platforms from 1 January 2022.

Options have been developed by the OECD

2.32 The OECD has led work that considered the tax implications of the gig and sharing economy. They have produced a range of reports and guidance in this space, including model rules for reporting by platforms with respect to sellers in the gig and sharing economy (OECD model rules),[3] a report on the impact of the gig and sharing economy on GST policy and administration,[4] and a code of conduct for co-operation between tax authorities and gig and sharing economy platforms (Code of Conduct).[5]

2.33 The OECD model rules were developed in response to calls for a global, standardised framework for reporting information relating to activities facilitated by digital platforms. The rules apply to digital platforms offering accommodation, transport, and personal services. They require digital platforms to collect information concerning income earned by sellers transacting on their platform and report it to the tax authority in the jurisdiction in which the platform is resident. The rules also have an optional module which extend the coverage of the reporting rules to cover the sale of goods and vehicle rental.

2.34 If all jurisdictions adopt the model rules, a digital platform will only need to report information once, to its own tax authority. The tax authority would then exchange that information with tax authorities in other jurisdictions to ensure that each jurisdiction receives information relevant to its residents. Implementation of the rules will thus limit the compliance costs imposed on digital platforms by ensuring consistency in reporting across jurisdictions.

2.35 There will be various benefits to tax authorities that choose to implement the model rules. The rules will reduce sellers’ ability to hide their income from the tax authorities. Tax authorities will be able to assist sellers with their tax obligations, be it through prompting or pre-population of sellers’ tax returns. Having a standardised set of reporting obligations will also benefit platforms as they will not have to comply to regimes with different rules and in different countries. The OECD model rules were developed with direct taxes such as income tax in mind, however they can also be used for GST purposes. The OECD has also developed an optional extension to the rules to align with developments in Europe.[6] If implemented, the extension would broaden the scope of the rules to cover the sale of goods and vehicle rental.

2.36 The OECD has also published a report that outlines the challenges facing GST/VAT policy and administration in the gig and sharing economy space, and policy options to respond to these challenges. It presents a useful framework from which tax authorities can develop a strategy for responding to the growth of the sharing economy. The report does not prescribe any one policy response to address issues with GST compliance and fairness in the sharing economy but recognises that the right policy response will be jurisdiction-specific and may entail a range of options working together. These options are discussed in the following section.

2.37 The OECD have also produced a Code of Conduct which is intended to facilitate co-operation between tax authorities and digital platforms in the gig and sharing economy. It sets out core elements of co-operation between tax authorities and platform operators (those who run the digital platforms). The purpose is to promote standardisation of ‘soft law’ approaches to the provision of information and to help sellers understand their obligations.

Options for improving compliance and fairness

2.38 Education is one method by which to increase compliance of sellers with both their income tax and potential GST obligations. Many sellers are likely unaware of their obligations and may not have completed a tax return before. Some sellers may be deliberately non-compliant and not reporting their income to Inland Revenue to avoid having to pay tax on amounts earned from these activities.

2.39 Inland Revenue has information on its website directing sellers on their potential tax obligations, however there is scope to be more targeted in the delivery of this information. Another option is to work with digital platforms as distributors of educative material. Digital platforms are well-placed to deliver timely and accurate information to sellers concerning their tax obligations given the data they hold and their digital proximity to sellers.

2.40 Assisting sellers with their tax obligations and improving compliance could also be achieved through the provision of data to the tax authorities. Data collected by digital platforms and passed on to the tax authorities (under the OECD model rules, for example) could be utilised by tax authorities to improve compliance in two ways. Firstly, the data could be used to pre-populate income tax returns of sellers. Whether pre-population is a feasible option will depend on the accuracy of the data passed on by the digital platform, and the timing of data provision. Alternatively, tax authorities could inform identified sellers that they have data on them and that they expect to see incomes reported by them at the right time as part of the income tax return process.

2.41 A third compliance enhancing approach would be to involve digital platforms in collection of the tax. This could be achieved in several ways. For GST purposes, the digital platform could have a role of collecting GST on behalf of sellers in the gig and sharing economy and paying that to Inland Revenue. For income tax purposes, a withholding tax could be introduced. There are difficulties with implementing withholding taxes however, as they impose additional compliance costs on the person responsible for withholding and the rate is often difficult to determine.

2.42 Alternatively, the digital platform could be made jointly and severally liable for any GST undeclared by sellers on the platform, so that the platform must return tax in some cases where the seller has failed to. This liability could be triggered where Inland Revenue notifies the digital platform of an instance of non-compliance that it fails to follow up on, or where the digital platform has a reasonable expectation that a seller should be registered for GST but is not.

2.43 A problem with these options is that, for GST, the issue in many cases is not about compliance, but is about fairness, as many sellers do not meet the registration threshold while their more traditional counterparts do (for example, a hotel would charge GST on their rooms while an accommodation sharing host might not meet the threshold required to charge GST).

2.44 To address this problem of fairness, the registration threshold could be lowered to capture supplies made through the gig and sharing economy. However, the registration threshold is in place for a reason; the compliance and administration costs of imposing GST on low-value supplies are outweighed by the amount of GST that would be collected. One option that could be considered is to reduce the GST registration threshold specifically for sellers operating in the gig and sharing economy. However, this option would ignore the fact that there is a third party capable of collecting and returning GST on behalf of its users, which has the advantage of reducing compliance costs and greater accuracy. A solution that responds to this concern is to deem the digital platform to be the supplier of the goods or services provided by the seller. The platform would then be obliged to return GST on all supplies made through the platform. The registration threshold would apply to the digital platform, rather than the individual seller.

2.45 This has the benefit of addressing some of the fairness concerns, however it does not address issues with sellers’ compliance costs as; while GST on sales would be managed by the platform (likely increasing platform compliance costs), there is still an issue of how to ensure sellers are able to claim GST deductions in a manner that is easy to comply with. These problems will be discussed further in chapter four.

2.46 The options outlined are not mutually exclusive; they may be applied alongside one another. It is noted that any proposals need to be balanced against the impact of those changes on taxpayers’ compliance costs (including sellers and digital platforms), Inland Revenue’s administration costs, and the fairness, coherence, and efficiency of the tax system more broadly. Submissions are welcomed on whether the proposals discussed below strike the right balance between improving tax revenue and fairness but also not levying undue compliance and administration costs on the parties involved. Specific proposals are discussed in greater detail in the following chapters.

Criteria for assessing the options

2.47 The remainder of this discussion document considers options to address some of these issues in greater detail. To determine the most appropriate response, the options will be assessed against the following standard principles for assessing tax policy changes:

  • Fairness: Do the preferred options level the playing field between traditional suppliers and sellers in the gig and sharing economy? This is often described as horizontal equity: the idea that people in the same position should pay the same amount of tax.
  • Compliance: Do the preferred options encourage sellers in the gig and sharing economy to comply with their tax obligations with low compliance costs?
  • Administration: Are the preferred options possible for Inland Revenue to implement and administer without substantial ongoing administration costs?
  • Efficiency: Do the preferred options minimise impediments to economic growth? Do the options avoid distortions to taxpayer decisions?
  • Coherence: Do the preferred options make sense in the context of the entire tax system and New Zealand’s international tax relations? Are the preferred options consistent with New Zealand’s broad-base low-rate framework?
  • Sustainability: Are the preferred options future-proofed? Will the options be able to apply and extend to future developments in the gig and sharing economy space without the need for further regulatory change?


[1] Bornman, M., & Wessels, J. (2018). The tax compliance decision of the individual in business in the sharing economy. eJTR, 16, 425; Migai, C. O., de Jong, J., & Owens, J. P. (2018); Oei, S. Y., & Ring, D. M. (2015). Can sharing be taxed. Wash. UL Rev., 93, 989. The sharing economy: turning challenges into compliance opportunities for tax administrations. eJTR, 16, 395. One study looked at conversations between ride-sharing sellers on various internet discussion forums. The authors found that the tax advice shared in these forums ranged in sophistication and accuracy. They concluded that non-compliance was likely to be at its lowest for expenses claimed by ride-sharing sellers: Oei, S. Y., & Ring, D. M. (2017). The tax lives of Uber drivers: Evidence from internet discussion forums. Colum. J. Tax L., 8, 56.  

[2] Digital platforms often charge sellers a fee for facilitating the transaction between the seller and the buyer. Unless these facilitation services are provided to GST registered recipients, they are subject to GST under New Zealand’s remote services rules which require non-residents (including offshore platforms) to charge GST on services provided to New Zealand residents. If the platform is New Zealand resident, they will be registered for New Zealand GST and responsible for returning GST on the facilitation fee under our domestic rules.  

[3] OECD. (2020). Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy. OECD, Paris.  

[4] OECD. (2021). The Impact of the Growth of the Sharing and Gig Economy on VAT/GST Policy and Administration. OECD Publishing, Paris.  

[5] OECD. (2020). Code of Conduct: Co-operation between tax administrations and sharing and gig economy platforms. OECD, Paris.  

[6] The Council Directive (EU) 2021/514 (known as DAC7) sets out a reporting regime for platforms and will be implemented by EU members by 1 January 2023. DAC7 will be discussed more in chapter 3 but is very similar in function to the model rules (including optional extension).