Better conditions for growth and correct tax payments in the sharing and platform economy

The sharing and platform economy provides new opportunities for growth and innovation among private individuals and supports better socioeconomic exploitation of household activities.

This law implements the former Government and the Danish People’s Party Agreement on better conditions for growth and proper payment of taxes in the sharing and platform economy that include new and changed basic deductions for the sharing economic income.

The goal of the law is to make sure that the Danes who participate in the sharing and platform economy pay the correct tax and to make sure that the regulation regarding income from sharing and platform economy is clear to the citizens involved.

Principle #1 on simple and distinct rules

Principle number one provides that, where possible, legislation should be simple and distinct so as to be easier to manage and to contribute to a more uniform administration that can be digitally supported.

Under this law, the rules on the letting of all-year dwellings and the letting of part of an all-year dwelling are such that these rules are more in keeping with the regulation of second homes. The regulation is made simpler and easier to manage for the benefit of the public administration and for the benefit of citizens wishing to rent their all-year dwellings.

Furthermore the introduction of flat-rate allowances for all-year-dwellings and car-rentals etc. also contributes to the clarity and distinction of the regulation.

Principle #7 Legislation should prevent fraud and errors

Principle number seven requires legislation to be designed in such a way as to prevent fraud and allow for efficient control, which can be supported digitally.

The law provides an incentive to report the letting of second homes, all-year-dwellings, cars, boats and caravans through the allocation of deductions. In this way it is ensured that in almost every case there is a clear advantage of using third parties, that report to the tax authorities. Thus, the legislation demonstrates how incentive structures can effectively prevent fraud and error.

Additionally the rental platforms are supported by the possibility of reporting users’ revenues to the tax authorities through the creation of a digital reporting solution. A digital reporting option makes it more attractive and easier to report to the authorities, which supports a better means of effective control and prevention of fraud in accordance with principle number seven.

Effects and consequences

The law entails administrative costs for the Danish Tax Agency for the development of a new digital transmission solution for platforms in the sharing economy. Among other things, a solution must be developed for unique user identification and a receiver solution (database) for storage and quality assurance of data. In addition, the law provides administrative expenditures for the tax agency to strengthen tax control and strengthen the guidance targeted at companies and citizens actively engaging in the sharing economy.

Conclusion

The law on better conditions for growth and correct tax payment in the sharing and platform economy is a good example of how legislation can be formulated in view of clear and simple rules as prescribed by principle number one.

To this end, the law demonstrates how the establishment of positive incentives for reporting to tax authorities and the creation of a digitally supported reporting solution contribute to effective control and prevention of fraud in accordance with principle number seven.