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Daily Mirror – Lankan gig economy lacks level playing field as foreign players not subject to local regulations and tax laws

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The Sri Lankan gig platforms are at a disadvantage over their foreign counterparts, who have their operations here, as the former comes under regulatory scrutiny and local tax laws while the latter is not, says the Central Bank.

While the issue has come under some scrutiny in the past, regulatory or policy redress did not come about either due to authorities’ preoccupation with other issues or the gig economy then wasn’t a force to be reckoned with.  
However, the matter has now returned with force, due to the fast sprawling nature of the gig economy and its outsize nature in the present context with COVID-19. 

“…gig platforms, which are operating worldwide, despite being based in a particular country, are difficult to be controlled by the host country’s regulatory environment and taxation system, in the absence of local business registration,” the Central Bank said in a special report.   

“In contrast, the local platforms are under regulatory scrutiny and are liable for local taxes. Such differences in the applicability of regulation will not ensure a level playing field for local operators,” the authors of the report said.
While there are many gig platforms—both local and foreign—in operation in Sri Lanka, the ride-hailing and delivery platforms such as PickMe and Uber, are at the forefront, given the essential nature of 
their business. 

In an earlier report, PickMe Founder and Chief Executive Jiffry Zulfer raised concerns over the lack of a level playing field in the marketplace, due to them having to make a sizeable Value-Added Tax (VAT) payment, putting them at a huge disadvantage, when the others do not. 

The gig economy involves one’s labour, professional expertise or any other service, for a fee, often operating as a freelance worker or an independent contractual worker. 

While the gig economy was prevalent ever since people started working, it became fashionable with the advent of new digital platforms and online market places, which do the matchmaking between those who seek some service and one who is willing to offer to provide it, as an independent contractor or consultant. 

The platform operator retains a fee or a commission for the role of the middleman.  

Technology and digital platforms such as ride-hailing platforms, sharing platforms and online freelance platforms, give a tremendous flywheel to the gig economy, to give its recent rapid ascendancy to where it is today. 

While the gig economy has empowered people who seek freelancing or independent contractual working, it has also thrown several challenges to the same independent contractual workers and governments around the world in areas of absence of worker protection. 

This became evidently visible during the pandemic, where these workers had to be looked after by the government, as there was no employer-employee contract between the gig platform operator and independent contractual worker. 

While the State of California in the United States brought in legislations early this year to limit these platform operators to classify workers as independent contractual workers, which these platforms did as a way to get away with the need to providing their workers with paid leave, minimum wage and the entitlement for social security, such as contributory retirement benefits. 

Sri Lanka’s labour commissioner earlier this year said they are also planning to bring similar laws to make the employers responsible for the freelance workers and independent contractual workers, whose services are obtained to help keep their platforms in business. 

 

 


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Economy

Why the Uber driver case has the potential to alter Canada’s gig economy forever

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Heller was a driver for UberEats who argued that he was an employee, not an independent contractor. That meant Uber owed him overtime, vacation, holiday pay, as well as other entitlements.

The Supreme Court didn’t answer the question of whether Heller and other Uber drivers were employees or not, so in that respect the real issue lies ahead. But it did remove an important roadblock, paving the way for a potentially $400 million lawsuit.

Tucked away in the contractor agreement that every Uber driver must sign before they can start working is an arbitration clause.

The clause required drivers to bring any problems to arbitration in Amsterdam, the Netherlands, and not to an Ontario court. The arbitration in Amsterdam would cost around $14,000 in administrative fees up front, as well as the cost of transport and legal representation in the Netherlands. Something no Uber driver could even possibly afford. Take Heller himself, who earns around $400 to $600 a week for 40 or more hours of work.

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Gig Economy Ballot Measure Fails Workers, Labor Groups Say (1)

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Daily Labor Report®

July 7, 2020, 8:45 PM

A California ballot measure supported by ride-hailing and delivery companies would lower workers’ wages and limit the power of legislators to institute new labor protections, according to a new report from two labor advocacy groups.

Proposition 22, known as the “Protect App-Based Drivers and Services Act,” will appear before California voters in November and is backed by $110 million from Uber, Lyft, Postmates, Instacart and Doordash. The companies say their workers want to preserve their status as independent contractors, while the National Employment Law Project and the Partnership for Working Families counter that the proposition would roll back existing protections under a state law giving certain gig workers…

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The OECD’s new reporting framework for the gig economy

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The Organisation for Economic Co-operation and Development (OECD) released model rules on 3 July that would require digital platforms to report information to tax authorities about platform users’ income from offering accommodation, transport, and personal services.

The model rules will help those in the gig and sharing economy “in being compliant with their tax obligations” and ensure a level playing field with traditional businesses, according to an OECD press statement. The rules were approved 29 June by the OECD/G20 Inclusive Framework on BEPS and will apply only in jurisdictions that choose to formally adopt them.

The model rules focus on accommodation, transport, and personal services because “[t]hese are the sectors that pose certain tax compliance risks in light of their scale, the income they generate and the profile of the sellers [platform users] involved”, the OECD said. The rules could be expanded in the future as digital markets evolve.

Two key features of the Model Rules for Reporting by Platform Operators With Respect to Sellers in the Sharing and Gig Economy is that they cover:

  • A broad scope of platform operators and sellers to ensure that as many relevant transactions as possible are being reported. “Sellers” can be either individuals or entities;
  • A targeted scope of reportable transactions, focusing on accommodation (eg, the rental of homes), transport (eg, delivery), and personal services. Personal service generally means “a service involving time- or task-based work performed by one or more individuals at the request of a user, unless such work is purely ancillary to the overall transaction”, and some examples include manual labour, tutoring, copywriting, and data manipulation, as well as clerical, legal, or accounting tasks.

The model rules require annual reporting to tax administrations and sellers by 31 January of the year following the reportable period.

A multilateral approach

Some nations have already implemented measures requiring platform operators to report platform users’ income to the tax authorities. The OECD says it hopes the model rules will help limit or contain this recent proliferation of unilateral reporting requirements. The OECD intends the model rules to streamline reporting regimes for tax administrations and platform operators alike.

Efforts will continue, the OECD said, to develop an international framework to facilitate the automatic exchange of information collected under the model rules.

The OECD noted that the platform economy increases opportunities for tax collection by creating electronic records of transactions that previously were carried out in the informal cash economy.

The model rules are one aspect of the OECD’s larger effort to address challenges arising from the digitalisation of the economy, and their approval by the OECD/G20 Inclusive Framework on BEPS proves that multilateral solutions “are possible”, Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said in the press statement.

Dave Strausfeld, J.D., (David.Strausfeld@aicpa-cima.com) is an FM magazine senior editor.

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