The role of online platforms in ensuring tax compliance by their users
LITRG have responded to the HMRC/HMT consultation looking at online platforms’ role in ensuring tax compliance by their users. We suggest, amongst other things, that developing tax literacy from an early age is essential to equip people for navigating the opportunities – and pitfalls – of the sharing/gig economies. While there is certainly more that the online platforms could do in this area, we think the primary responsibility for this rests with the authorities.
We agree that people who earn their money in the sharing and gig economies may have never earned money without any employer to act as an intermediary between them and HMRC before, and can find it difficult to understand and meet their tax obligations.
There are a variety of ways that HMRC and the online platforms could work together to create a culture of tax compliance within the sharing and gig economies. For example, HMRC could convey messages through the online forums to point users to appropriate HMRC publications or other sources of help. HMRC could try and learn from the online platforms about specific challenges and issues for those in the sharing/gig economies, and tailor its guidance for both taxpayers and HMRC staff accordingly. The search facility on GOV.UK could be configured to recognise the names of some of the more common platforms e.g. eBay, Uber, Airbnb, directing an individual using those terms in a search to an appropriate tax guidance page.
We think it would be unwise to let a big economic phenomenon like the sharing/gig economies emerge without thinking of a way of taxing it without so much dependence on self-assessment. It’s therefore good to see the Government thinking more strategically and considering other potential approaches.
One option might be to enable platforms to operate something akin to the construction industry tax deduction scheme, but at a rate that would minimise the number of situations in which workers have to claim refunds of over-deducted tax. Final adjustments could be made by means of a simple reconciliation process at the end of the year.
We note the IRS has recently released a withholding tax calculator which helps taxpayers identify their correct tax withholding. We suggest that this, and other international withholding models, would be worth investigating further as part of the Government’s work.
The consultation document can be found on GOV.UK.
Our response can be found here: The role of online platforms in ensuring tax compliance by their users – LITRG response