The Sharing Economy: When Will We Move Out of the Shadows and into the Light?
Today, we come into contact with the sharing economy on a daily basis. Be it through (social) media coverage, as a user or service provider, this ‘new’ form of economy has quickly acquired substantial importance in our lives.
This new model has both its supporters and detractors, but one thing is certain: it seeks to grow rapidly. In this regard, it appears to be on the right track! According to a study by auditing and consultancy firm PricewaterhouseCoopers, the sharing economy's worldwide market will reach USD 335 billion by 2025. Clearly, this disruptor of the classical economic model must be taken seriously.
However, it should be noted that the current legislative framework is not suited to the sharing economy and thus causes tensions between the various stakeholders involved. To date, a certain number of legislative initiatives have been taken to encourage the development of start-ups in general (tax shelters, special social security arrangements, etc.) and, more specifically, to facilitate integration of the sharing economy into the traditional economic model. Thus, Minister in charge of the Digital Agenda Alexander De Croo recently presented a measure to clarify and ease the tax burden of individuals taking part in the sharing economy. His proposal provides for the levying of withholding tax on a percentage of the income received by the service provider. As long as the individual remains below the threshold of EUR 5,000 miscellaneous income, he or she can benefit from a reduced tax rate of 10%, with no obligation to register as a self-employed.
This new measure is clearly good news. On the one hand, it seeks to ensure (through the abovementioned tax threshold) that the beneficiaries of the less burdensome system are indeed individuals providing non-professional services; on the other hand, the simplicity with which the withholding tax is levied should boost its efficiency and thus support the development of the sharing economy.
Let's now hope that this is just the top of the iceberg and to soon see the adoption of a special status which will provide an effective framework for collaborative citizens.
A special status for "collaborative citizens"
Due to their lack of integration into the traditional economic model, collaborative citizens currently find themselves in uncharted waters. These intruders have caused an outcry in certain sectors and are themselves participating in the sharing economy without truly understanding how to manage the tax and social security aspects. It's clearly high time to clarify their status, in order to ensure that they are no longer perceived as troublemakers but rather as genuine stakeholders in their communities.
The special status designed for these individuals should be both dynamic and flexible, capable of being adapted along with the development of these economic misfits. The new status should be conceived and adjusted based on the sharing economy's founding principles; being the occasional sharing of assets or knowledge between non-professional peers who form (in principle) a community. The main challenge? Promoting these fundamental principles while preventing abuse that could hinder their development.
Initially, this special status should focus on three major issues: an appropriate tax status, fair competition with established professionals, and a suitable social security status. The tax measure proposed by Minister De Croo appears to resolve the major issues associated with the tax status of collaborative citizens. Let's hope that the implementation of this measure confirms as much. This leaves the problems of unfair competition and social security. Here are some ideas to consider.
The sharing economy has changed our habits and shaken things up in certain sectors. A lack of precise rules and status for collaborative citizens has created an imbalance with professionals who are subject to (strict) rules in their fields. This is obviously a problem. One that can and should be resolved without stifling the growth of this type of economy.
If the occasional and non-professional nature of the sharing economy is maintained, there can be no question of real competition. In this regard, it is essential that the collaborative citizen status excludes those who would like to abuse the system by posing as individual providers. Moreover, the rules applicable to the sharing economy should be balanced in order to ensure the provision of quality services amongst citizens without stifling initiatives with a legislative framework that is impossible to apply.
In this regard, most platforms and users appear willing to follow a certain number of rules. A priori, these may be very limited. Since the sharing economy is characterised by networks, Internet users assess their peers and thus establish a self-regulating filter. Anyone who refuses to abide by the rules is quickly expelled from the community, which is subject to permanent oversight. Moreover, citizens who use the sharing economy are aware that they are dealing with a community of non-professionals and therefore accept the rules of the collaborative game.
As for sectors that require closer oversight (hotels, restaurants, financial services, etc.), the time has come to sit down with the supervisory authorities responsible for these sectors and determine minimum rules with which collaborative citizens must comply. These minimum rules can then be provided to users of the goods or services in question through the platform. In addition, a point of contact should be provided for on the platform in order to make it easy for users to report violations of the rules. The platform itself will be responsible for conveying complaints, if any, to the competent supervisory authorities.
This combination of minimum rules, self-regulation and maintaining the citizen nature of the sharing economy should reduce the problem of unfair competition in a number of sectors. Of course, this will require extensive dialogue and the goodwill of all interested parties, but everyone involved should benefit.
What about employment law?
The third major (and far from the least important) issue is integrating the sharing economy into the existing employment legislative framework. Some detractors of the sharing economy claim that it creates a precarious workforce, one without social security protection, job security or a minimum wage.
However, collaborative citizens who already have a job and wish to supplement their income by cooking for their neighbours or mowing their neighbour’s lawn are not at risk of falling into this category. They already have a job and social security coverage, to which they contribute. Moreover, a portion of the tax withheld at source can always be allocated to social security. For jobseekers, on the other hand, the current system should be overhauled in order to allow them to become collaborative citizens. Currently, persons who receive unemployment benefits are not permitted to perform paid work and face penalties if they do so. This should be changed by extending the status of collaborative citizen to everyone.
In the specific case of jobseekers, allowing them to become collaborative citizens without fear of sanctions can only be beneficial. Indeed, the sharing economy is not only a source of activity, but also of social contacts and, of course, the fulfilment of doing something you love. In addition, implementation of the De Croo proposal should render their tax situation completely transparent.
The development of this status thus requires putting citizens at the heart of things, regardless of their employment status, in order to enable them to become part of the communities to which they wish to belong and thus participate in the development of the sharing economy.
The time for dialogue is now
The adoption of a status for collaborative citizens will require many initiatives by stakeholders as well as public authorities. There appears to be a political will to do so and sharing platforms are seeking to integrate their activities more fully into our daily lives. All the pieces of the puzzle appear to be in place to establish a suitable status for collaborative citizens. Let's now initiate a constructive dialogue and hope that the platforms, authorities and regulators can join forces to find a way of bringing the sharing economy out of the shadows and into the light.