Could we lose Airbnb and Uber?
19 March 2023, 14.3k views*
Kiwis love to make use of the latest international services that make life easier – things like Uber and Airbnb. But now, with new tax changes proposed by the government, could they drive these services out of New Zealand? Kirk Hope, CEO of BusinessNZ explores the risks.
Kiwis enjoy being free to earn some extra cash to supplement their income with app-based enterprises, including ridesharing, food delivery or short-term rentals. We also love to make use of the latest international services that make life easier – things like Uber and Airbnb.
So to make sure we don’t lose them, New Zealand needs to remain an attractive and easy place for these companies to operate.
When it comes to taxes, we have the opportunity to get things right or very wrong for international businesses looking to bring new services to New Zealand.
Let’s talk about the issue of creeping taxes, what it could mean for you and for the emerging gig economy in New Zealand.
A Gig economy is a labour market which operates on short-term contracts – or ‘gigs’, instead of permanent employment.
You’d typically access these types of services online. Think ridesharing, food delivery, or short-term accommodation.
Paying and collecting tax these days isn’t like how it used to be. While the New Zealand tax system is a complicated piece of machinery, its essential that not only people in the policy space understand it, but that businesses know their tax obligations too.
The gig economy brings enormous potential, as well as new challenges in taxing it fairly. These services do pay tax in New Zealand, and if they are going to thrive and contribute to our recovery, then we need a tax system that accommodates them.
The Government’s recent Tax Bill before Parliament would, among other things, extend the existing GST marketplace rules to capture platform providers like accommodation, ridesharing, as well as food and beverage delivery services. This changes the current situation under which the likes of Uber drivers and Airbnb hosts are responsible for levying GST on their services themselves. But they only need to do so if they are over the $60,000 revenue threshold at which businesses need to register for GST.
We’ve heard from the types of businesses affected, who tell us additional costs can’t be worn forever, and will eventually be passed on to the customer – that’s just the nature of things.
But with inflation and the cost of everything else on the rise, things like ridesharing, accommodation and food delivery will be squeezed out of many people’s budgets, meaning elements of our gig economy may no longer be viable.
That means we could lose the likes of Uber, Airbnb and other things we’ve grown accustomed to as they focus on more favourable markets offshore.
Given we’re a small country that competes on the international market for most things, we need to think long and hard about each step we take to attract new industry.
The Bill also recommends a new reporting framework developed by the OECD, one which requires New Zealand-based digital platforms to provide IRD with data about individual sellers on an annual basis.
The IRD is banking on other countries doing the same once we adopt these guidelines, so we can exchange information and make sure the right tax goes to the right country.
That’s because the Government believes numerous transactions made online aren’t being taxed properly, and that adopting their framework is the solution. BusinessNZ believes every business should ensure they are paying the right amount of tax, but changes to the system also need to be practical and conscious of what’s best for New Zealand long-term.
If these reporting rules are the new way forward, then the trick is getting some, if not most, other nations to adopt them first.
We’re usually a nation of doers, keen to give things a go even when they haven’t been done before. But this isn’t one of those occasions where New Zealand should strive to be the world’s first.
As we’ve seen with the likes of Covid mandates, a lot can happen in a year. Many countries are uncertain about the best way to move forward, so why rush into it?
Like any good policy developed over time, the Government would be wise to pause and reflect and listen to people and to businesses impacted while tackling this issue.
At the end of the day, business and Government both want to make tax payment and compliance as simple and fair as possible – and it isn’t an easy issue to sort out. With the cost of living already soaring, and with businesses large and small still recovering from the past two years of Covid restrictions, any additional cost could tip us over the edge.
It’s a balancing act. And while other countries remain undecided on key decisions around taxing and reporting for the gig economy, don’t you think New Zealand should avoid the risk of becoming the odd one out?
I’m Kirk Hope for the Common Room.
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