13 October 2017

Government outlines new possibilities of regulating sharing economy

The Office of the Government published its analysis of possible ways to regulate the sharing economy and digital platforms. It primarily targets the most widespread accommodation and transport services.

Radim Kotlaba
Linda Kolaříková

The sharing economy, or collaborative consumption, is not a new trend – yet, its significance has been growing rapidly. In the Czech Republic, particularly in Prague, shared accommodation (such as Airbnb) and transportation (for instance Uber) are most widespread. According to the governmental analysis, these services are quickly catching up with the traditionally provided ones: in transportation, they currently involve one fifth to one fourth of drivers; in accommodation, they account for up to one half of the total number of beds.

While these services bring undisputable benefits to consumers, they mostly fall under the grey economy – their providers often do not report income from these activities and subsequently do not pay tax or applicable local fees. According to the government’s analysis, at least 80% of these services approximate a regular business activity, going far beyond the original concept of sharing idle property (albeit for consideration).

Clearly, none of the solutions that come to mind is perfect and can satisfy all parties involved. It is to be noted that Uber, in particular, is facing numerous litigations and complaints, both in the Czech Republic and abroad. There is, for instance, the court-issued preliminary ruling/injunction prohibiting Uber from operating or mediating its services in the territory of the City of Brno. Recently, an opinion of the CJEU Advocate General rejected the assertion of Uber’s Barcelona branch that it is an information service, therefore only subject to limited regulation. Instead, the Advocate General pronounced it a transportation service that as such has to comply with applicable regulatory requirements.

The recommendations of the analysis mention the possibility of a comprehensive regulation of earnings generated from the sharing economy: a limit should be set (on a turnover or time basis) making it possible to clearly distinguish between “extra earnings” and a business activity. Learning from examples abroad (for instance from Finland, Estonia or Lithuania), the tax administrator’s lack of information should be eliminated by using data recorded by intermediaries on payments between the service providers and users. The published document is not to be considered the official standpoint of the government but rather a basis for a factual debate on the adoption of concrete regulations for the sharing economy.

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