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The emergence of cab aggregators in the country is a radical change in the taxi market. They deliver a better experience through the fast and convenient cab ordering, reduced waiting times, and cashless payments. Riders and drivers gain from the market-based pricing with an automatic balance of supply and demand. The competition between aggregators lowers prices and increases the availability of cab services for passengers. The constant flow of orders enables drivers to gain an even load and maximize earnings. Such win-win scenarios encourage a significant shift towards transportation via aggregators. Then, the authorities think about how to get more taxes from aggregators and the independent drivers collaborating with them. Traditionally, tax administrations have dealt with this by appointing an aggregator as a tax agent. In this article we will discuss potential drawbacks associated with this approach.
Informal employment is a key component of the shadow economy. This occurs when an employer hires an employee but does not complete an employment contract with him or her and pays him or her in cash without deducting applicable taxes or insurance premiums. Informal employment is a knot that must be untangled on a regular basis. Punishment, fines, and prohibitions, as many countries have discovered, do not solve the problem. Instead of focusing on the consequences, efforts should be directed toward identifying the causes of informal employment and developing a step-by-step transformation of the country's economic and legal system to eliminate them.
The International Monetary Fund (IMF) defines the shadow economy as any economic activity that is hidden from official authorities for monetary, regulatory, and institutional reasons. Informal employment, according to the International Labour Organization (ILO), refers to work arrangements that are not subject to national labor regulation, either de facto or de jure. The International Association of Accountants (ACCA) has highlighted three important influences on the global shadow economy's development: bureaucratic quality, corruption control, and GDP per capita. Global crises like the 2008 financial crisis and the COVID-19 pandemic in 2020 may lead to a fresh surge in the global shadow economy. The rapid growth of the online economy and digital platforms changes the job structure and also contributes to the growth of shadow labor markets.
Taxi is one of the most popular types of public transport in the world. The taxi market makes a significant share of the economy of any country and can reach up to 1% of GDP. Hundreds of thousands and even millions of drivers can be involved in this segment of the transportation industry. Ride-hailing online platforms and mobile applications can operate within one country and cross-border. The lack of regulations for taxation of the new digital business models creates many problems for the national tax authorities. The standard response of forbidding and not allowing can further complicate the situation and encourage drivers to go into the shadows to evade taxation. Tax authorities should cooperate with aggregators, giving them the green light for localizing their business on the territory of the state, getting information about their customers (drivers and taxi companies), and transactions to form a tax base
Every state needs to control the shadow economy. It may grow because of the holes in a legislative framework or the expansion of novel forms of doing business. The new tax regimes emerge as results from systematic work. Implementation of the tax regime for self-employed should introduce a so-called Professional Income Tax (PIT) and start from the research and experiments.
Digital Tax