By: Diane Ring
Uber, one of the most prominent faces of the sharing economy, has not always been welcome in the EU. Similarly, Airbnb has experienced legal, regulatory, and public policy resistance across European countries. However, two recent developments in the EU suggest that, on balance, Europe might be staking out a regulatory path for the sharing economy that is intended to demonstrate the region’s support for the new sector. . . .
Communication on a European agenda for the collaborative economy
First, on June 2, 2016, the European Commission (EC) released a Communication to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions outlining “a European agenda for the collaborative economy.” The guidance was expected, having been suggested in Fall 2015 and more formally announced in January 2016. The theme of the Communication was the desirability of a single-market strategy for regulating the collaborative economy (as the EC referred to it). The accompanying EC “Fact Sheet” recognized that “different countries [will] have different rules” but outlined five “good practices” in regulating the collaborative economy, including “not demanding prior authorisations for the short-term rental of primary residences” and “reviewing quantitative restrictions in transport sectors and facilitating market access for all actors.” Both recommendations sound like specific nods to the ridesharing and home sharing segments of the collaborative economy. Moreover, the Fact Sheet urged member states that “[a]bsolute bans and quantitative restrictions should only be used as a measure of last resort.”
Turning back to the Communication itself, the detailed discussion focuses on a more nuanced examination of sharing. The Communication noted that the rise of the collaborative economy provides an opportunity to reassess the value and continuing role of existing regulation as applied to both new and existing actors, but left open the possibility that the “objectives pursued in legislation remain valid” across the board. It also discussed the need to distinguish between a peer provider of services and a professional; engaged in analysis of liability regimes as applied to the platforms; assessed the rights of workers under EU labor law; and stressed the tax policy goal of “apply[ing] functionally similar tax obligations to businesses providing comparable services” (with an eye toward reducing administrative burdens). All of this guidance is nonbinding, but does represent the first detailed effort of the EC to offer a systematic assessment of regulatory issues in the sharing economy.
New Sharing Economy Legislation in Belgium
The second major development in EU regulation of sharing in the past month occurred in Belgium, which enacted a new sharing economy tax law effective July 1, 2016. The focus of the law is limited to the provision of services by individuals. A 20% withholding rate applies to annual gross revenue from services of up to 5,000 Euros (with a lump sum deduction allowed equal to 50% of the income, thereby providing an effective tax rate of 10%). Above that gross income threshold, the service provider would be classified as earning “professional income” and would face the standard progressive tax rates of 25% to 50% applicable to a self-employed person. The 20% tax is collected by the online platform (such as Uber) and transmitted to the tax authorities. Prior to this new regime, such sharing income was taxed under Belgium’s schedular system (assuming it was reported) as income from immovable property, income from moveable assets, and miscellaneous income (generally facing a tax rate of 33%).
What about Airbnb rentals? Under existing Belgium law, income from such rentals is divided into three categories: immovable income, movable income, and miscellaneous income. The new law does not change this. What it does do is treat the “miscellaneous income” portion (deemed to be 20% of the total rental) as subject to the new tax scheme for sharing workers who earn less than 5,000 Euros of gross income annually. Given Belgium’s past problems in trying to trace Belgian Uber-driver income, the new legislation may help formalize and clarify expectations on both the platform and the driver. However, by enacting an obligation to withhold on the platform, the new Belgium law goes further than current U.S. Form 1099K reporting requirements, which only require platforms such as Uber to report payments that meet certain thresholds, but do not require tax withholding.
These two summer developments in European regulation of the sharing economy signal a desire to facilitate operation in the new sector and to provide a clearer picture of regulatory expectations. Not everyone, though, sees the developments as “friendly” to Uber and Airbnb, citing for example the position of the EC guidance on worker status (likely to produce many employees). But arguably, this overall trend could be viewed as a positive development for the sharing economy in Europe, particularly, if one thinks back to the prospect earlier this year of Uber executives in French jails.