NSW Supreme Court rules Uber platform mere collection agent; GST obligations unclear
The Supreme Court of New South Wales in Australia has ruled ride-sharing drivers are independent, and not employees, in a case concerning ride-sharing. This means any Goods and Sales Tax obligations remain with the drivers who must still potentially register with the Australian Tax Office.
This contrasts with recent New Zealand gig economy GST case that ruled Uber was responsible since the drivers were considered employees. But UK Uber VAT case is following the Australia line in the latest appeal.
The EU’s VAT in the Digital Age reforms includes Pillar 2, VAT on digital economy, which shifts VAT obligations to gig and accommodation sharing platforms.
Australia – Uber a mere collections agent
An Uber rider is charged a fare based in part as a function of time and distance plus tolls. Uber takes a service fee from the fare (typically 20-25%) and passes the rest onto the driver. The Australian court held Uber was a “mere payment collection agent” for amounts paid by riders to drivers. The driver being directly paid by the rider, therefore, such payments do not constitute wages paid or payable by the taxpayer and are not subject to payroll tax.
Global VAT and GST on gig economy work
Digital platforms facilitating the gig economy face varying VAT or GST obligations depending on the country in which they operate. These taxes are designed to ensure that both the platforms and their users contribute fairly to national tax revenues, given the increasing scale and VAT losses from online work and digital services.
1. VAT/GST on Platform Services
Gig platforms like Uber, Airbnb, or freelance marketplaces often charge service fees or commissions to users, whether they are workers or consumers. In many jurisdictions, these platforms must apply VAT or GST on these service fees. For example, in the EU, platforms must charge VAT if they meet the thresholds for taxable turnover. The rate depends on the specific country’s tax laws, but generally ranges between 15% and 25%. Similarly, countries like Australia and New Zealand impose GST on service fees collected by platforms, typically around 10-15%.
2. VAT/GST on Seller Services
For digital services or goods sold via gig platforms, sellers themselves may be subject to VAT or GST obligations. Some countries require platforms to withhold VAT/GST on behalf of sellers, especially when dealing with cross-border transactions. In the EU, the VAT One-Stop-Shop (OSS) scheme allows platforms to collect and remit VAT on behalf of sellers, streamlining compliance. In contrast, in Canada, digital platforms are responsible for ensuring the collection and remittance of GST on services provided by gig workers if they meet certain revenue thresholds.
3. Thresholds and Exemptions
Most countries establish a revenue threshold above which VAT or GST becomes applicable. For instance, if a gig worker’s revenue exceeds the threshold (e.g., €10,000 in the EU, £90,000 in the UK), they must register for VAT/GST and charge it on their services. However, below this threshold, many small-scale sellers may be exempt.
4. Cross-Border VAT/GST
Digital platforms face additional complexities when gig workers or consumers operate in different countries. In these cases, VAT/GST is often charged based on the consumer’s location (destination principle). For instance, in the EU, the VAT OSS regime requires platforms to collect VAT according to the buyer’s location, simplifying cross-border compliance.
The EU plans 2025 VAT registration threshold equivalence for SME taxpayers resident in other EU states
In conclusion, VAT or GST obligations for gig platforms encompass both the platform’s services and those of individual sellers, often requiring compliance across borders and adhering to local laws. Automated systems and compliance frameworks, like VAT OSS in the EU, are increasingly crucial to manage these obligations efficiently.
