Tax and Technology

S. 4121. Introduction to the Sharing Economy

1.1. Introduction

The sharing economy has created new challenges for collecting value-added tax (VAT). A recognition that the current VAT framework is outdated led the European Commission to publish a legislative proposal called “VAT in the Digital Age” in December 2022. The proposal would significantly update the Union’s VAT legislation if approved. This paper examines the proposal, beginning with a description of the sharing economy in Chapter 1 followed by an analysis of how the rise of the sharing economy has affected VAT collection in Chapter 2. Chapter 3 assesses the Commission’s legislative proposal, and Chapter 4 explores whether any issues remain to be resolved if the commission proposal is passed in its current form. Finally, Chapter 5 concludes the thesis.

1.2. The Legal Basis of European VAT Law

The European Union (EU) has a common VAT system governed by the EU VAT Directive. The directive is implemented into the national law of the Member States. Some provisions of the directive must be adhered to strictly while Member States have more national autonomy in other areas. National legislation is therefore not fully harmonized, for example, w...