Tax Collection and Regulation Under the Business Model of the Sharing Economy and Implications for China

Abstract

With the revolutionary progress of digital technology, the sharing economy has become a key transformative force in the global economic structure. It breaks the conventional corporate transaction paradigm and establishes an innovative system for resource sharing, which is crucial for optimising resource allocation and enhancing utilisation efficiency. However, this new business model faces additional challenges with uncertainty in tax laws and delays in regulations. B2C (business to customer) and C2C (customer to customer) are the two most common business models in the sharing economy. Under the B2C model, businesses provide products or services directly to customers through sharing platforms, and under the C2C model, transactions between peers are more frequent, but the absence of clear tax regulations and law enforcement has resulted in growing issues of tax base erosion and unfair competition. This research analyses the structure and operation of several sharing economy platforms through case studies under two business models: business-to-customer and customer-to-customer. It discusses the effects of the sharing economy on the existing tax system within these two types of business models and assesses the issues. And effects of regulatory frameworks and challenges on tax among different jurisdictions. Based on the existing tax policies in different regions, some suggestions are put forward for China’s tax policy, which is “wading the river by groping for stones”.