BCG has translated in its articles “Hopping aboard the sharing economy” and “Learning to love (or live with) the sharing economy” interviews with more than 25 founders and CEOs of new shared economy companies around the world, as well as more 3,500 consumers in the U.S., Germany and India. The aim has been to conclude whether the sharing economy is a trend that will continue or is only temporary.
In this context, different countries around the world are trying to address the legislation issues of this new market, which some see as a threat and others as an opportunity.
At least $23 billion has been invested in the sharing economy
Despite some criticism of the sharing economy, it is a very relevant industry that does not necessarily have to be a threat, but an opportunity. It is not a passenger, and may be the source of new revenue streams. It makes consumers wonder why they own something if they can access it in the same way.
As stated in the European Parliament’s report “The Cost of Non-Europe in the Sharing Economy: Economic, Social and Legal Challenges and Opportunities”: Some augur strong growth and benefits to the sector. Others have doubts about their long-term development and predict a gradual recess. Today no one can say how this model will evolve or what its future will be.
It is estimated that $23 billion in venture capital funds has been invested in this market during 2010. However, when it comes to making an approximation about the total size of the sharing economy, things change as most of its private providers have, such as Airbnb – whose March 2017 funding round was $31 billion.
The strength of this market in New York City is also appreciated, as Uber’s fleet is nearly three times larger than that of taxis.
This market is fundamentally supported by two ways:
The first, thanks to those customers who either do not need to buy a particular product or do not have sufficient economy. An example of these expanding markets is ShareGrid, which rents American cameras, of a quality aimed mainly at professionals in the audiovisual field thanks to a platform. Being digitized reduces the hassle of renting.
On the other hand, those users who are willing to pay higher prices for goods that can generate a stream of revenue when shared. In fact, more than 80% of the people who offer these shared services in the U.S. and India, as well as more than 40% service providers in Germany, prefer to spend more on durable and shareable products, such as tools, equipment and vehicles that facilitate sharing.
According to economist Thomas Weber, of lausanne’s Polytechnique Fédérale school, sharing markets may provide a greater incentive for consumers to spend more on products, as well as seek durability. creates incentives for consumers to spend more on products and seek durability.
Millennial culture boosts the sharing economy
But this is not the only reason, so does millennials’ own ethics and culture drive the shared economy. This generation does not have among its desires the purchase of a car, for example. In addition, sharing is good for both the environment and sustainability, not only that, this generation is very prone to consulting the qualifications made by others, being something common in the shared economy.
“Underutilized resources that are reused and shared. That is the true shared economy, which produces a net improvement in efficiency. I believe more in the future of these models, linked to the philosophy of the circular economy (manufacturing thinking of reusing) than when only one market is replaced by another, such as Uber, or a fixed employee for another self-employed,” says Alejandro Lago, Professor of Production, IESE Technology and Operations.
According to the find made by BCG, in which asked the main advantages of the sharing economy, one of the main ones is that the consumer knows what he is getting thanks to these ratings. They also highlighted the variety, the possibility to access better products and services and to have a unique experience.
But what has not convinced non-users? They prefer the convenience of having their own products, and distrust these types of unused services before, as well as the unreliability that inspires them to share their payment information.
This has been overcome by the many economic benefits it brings, as well as, thanks to the insurance market also offering insurance for this type of economy and, again, the ratings and recommendations of users,
The leaders in this market are Airbnb and Uber, but other companies are following in their footsteps such as Lyft (USA), Didi Chuxing (China) and Wave (India), which are growing rapidly and positioning themselves.
There is no doubt that it is diversifying into different sectors. The best known are those related to travel sharing and accommodation, but, startups are emerging of office sharing, storage, logistics… With funding close to $2 billion, the vehicle-sharing fund is nearly $810 million and fashion’s is more than $240 million.
On the other hand, IESE recommends focusing more on models that share physical assets or generate new markets, because, “the greater the market expansion, the greater the economic advantage, as it will encourage activity and redistribute wealth among greater number of actors.”
Among the main threats of the shared economy, IESE highlights two: the possibility of monopolies being generated, aware of the demand thanks to Big Data. Another possible job precariousness that can lead to an uncontrolled offer in models that propose a temporary replacement of fixed labour.
Regulations are needed to regulate it
The Spanish vision of the sharing economy is not too positive. It is creating conflict between public institutions in the face of the difficulty of managing this economic engine. In the tax area there are also difficulties, with threatening messages of tax inspection.
Still, it’s in your hands whether it’s a positive influence or not. Normalizing the collaborative market by enforcing its fiscal obligations can positively change that threatening message and banish beliefs that the sharing economy is, something like a submerged economy.
The normalization of this type of economy begins by regulating the payment of taxes, as well as facilitating compliance of all operators, since many are unclear what their obligations are.
In fact, some measures should be directed against tax evasion, reporting on the tax obligations that are due to users and providers, so that they are more preventive mechanisms. The normalization of this economy in Spain depends, in large part, on measures to prevent and pursue it, especially in the main medium of this shared economy: digital platforms – they would be considered as collaborators of the Administration Tax..
Fiscal collaboration of shared economy platforms can provide a boost for standardization. Examples of this are Italy and Belgium, which have established withholdings on the revenues of platforms of this economy such as Uber or Airbnb –10% in the case of Belgium and 21% in the Italian country, provided that the rental is less than 30 days. Other countries require Airbnb to provide an annual summary of the platform’s tax status, as well as the platform collecting country or city taxes.
“In Europe each country sets its standard, although a homogeneous vision is sought. Competitors claim to be able to compete on an equal footing. And in some industries, such as automobiles, companies have taken positions in collaborative companies through purchases, own developments or agreements. The sector itself reflects. We have to make constructive self-criticism because it is not entirely obvious that we achieve that environmental effect and, in some cases, that social expectation has been lost and must be recovered,” says Albert Cañigueral, founder of ConsumoColaborativo.com and connector in Spain and Latin America.
It is known whether the collaborative activity is for profit
All of these examples of standardization help define when the sharing economy meets social needs or when its objective is purely commercial. Since, this economy has brought the exit from the economic crisis for a percentage of the most vulnerable population, it is therefore important to know the profit-making, and whether it provides a wealth or a minimum of income when defining taxes.
As a result, many countries such as Amsterdam, France, the United Kingdom or Norway have decided to make tax cuts, as well as amounts below which no taxes are required. In the Dutch capital, for example, if the house is rented for less than 60 days a year it is not established as a lucrative activity of a professional nature.
But this will not be possible without regulation. While Spain is in the midst of a regulatory absence, there are already countries, such as Italy, that are drafting a law to address this problem. This is where conflicts such as those with Uber and Blablacar arise.
However, the professor of Labour Law at the University of Valencia, Adrián Todolí, makes the difference according to the usuality when providing the service as an obligation to register as an autonomous person, that is, defining whether that activity is develops in isolation or not.
“The level of dedication is what distinguishes the professional from the individual, the question will come by how to measure that level of dedication and where to draw the line of separation,” he says in his book The Work in the Age of Shared Economy. “It is reasonable to understand that habituality is measured by temporary units, not profits. The day-to-day development of the activity will undoubtedly identify a self-employed worker, while running the activity for a single time will rule it out,” he says.
But, given that the main means of this economy are digital platforms, it will create a loophole, since the facilities they provide, will increase the frequency in which the business is carried out.
“It can be concluded that the conduct of activities in this new business model called the Shared Economy does not appear at all excluded from the Self-Employment Regime or from the contribution obligations. The Courts understand that the simple management – accounting and administration – of an economic activity is sufficient to consider that personal and direct work is carried out including here the activities of management of rental assets”, he says.
Inmaculada Ballester, senior professor of Labour and Social Security Law at the Jaume I University of Castellón and deputy magistrate of the TSJ of Valencia states that “The regulations governing the special regime for self-employed workers do not regulate when the development of a professional activity and the charge for it requires paying every month as a freelancer. However, it points to the interprofessional minimum wage as a formula for measuring the usuality.”
In his vision, the collection of sustained amounts of money could be used to presume that he has the usuality required by the rule and those who normally rent homes and receive these minimum amounts and continuously and maintain all months might require them to register as self-employed.
However, according to the teacher, it should be borne in mind that individuals who are not currently visible by the tax system in such perceptions may go unnoticed by social security law, which does not mean that there is no obligation. Possibly if such activities come to light and the labour inspection intervenes it is to begin to consider that these people are actually professionals and should quote and register in the Challenge.
