U.K. Considers Toughening Up Tax Rules on Uber, Airbnb Trade

(Bloomberg) -- The U.K. government is considering toughening up tax rules on activities in the sharing economy, such as rides with Uber Technologies Inc. or bookings made on Airbnb Inc., in a bid to raise more revenue and create a “level playing field” for businesses.

In a consultation document published Wednesday, the Treasury said it is reviewing how value-added tax is applied in the sector, because traditional businesses are more likely to be hit by the levy compared to those which are more digitally focused.

Britain is looking at ways to raise more revenue as it contends with its largest deficit in peacetime history, fueled by enormous public spending to fund its response to the coronavirus pandemic. Chancellor of the Exchequer Rishi Sunak has hinted that tax rises are coming once the economy has recovered from the crisis.

Under current rules, a business is liable to pay VAT if it has sales of more than 85,000 pounds ($114,000) a year. Yet for businesses such as Uber or Airbnb, someone providing a service using their platform is likely to fall below this threshold, and therefore does not have to pay the tax.

The Treasury said it expects an increasing proportion of economic activity to happen in the so-called sharing economy, meaning more and more transactions would fall out of the scope of the VAT rules.

There is a question of “the extent to which the digital platforms benefit from an unintended competitive advantage over many traditional, VAT-registered businesses,” the consultation document said. “Policymakers may need to consider the grounds for new laws that reflect the changing nature of economic activity in the digital age.”

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