SHARING ECONOMY NOW A TAXING ISSUE

Rent a... car, room, bed or necklace

-- ST ILLUSTRATION: MANNY FRANCISCO
-- ST ILLUSTRATION: MANNY FRANCISCO

Existing regulations do not address burgeoning sector that allows users to rent or share personal assets

THE rise of the "sharing economy" is making part-time entrepreneurs out of many Singaporeans, but also creating tax and regulatory headaches.

The number of platforms that allow personal assets - from spare rooms and cars to office equipment and jewellery - to be rented or shared has burgeoned in recent years. But that growth has raised legal and tax issues.

Local sharing platforms include iCarsClub, a car rental firm; home-rental portals PandaBed and Roomorama; and Rent Tycoons, a site that allows people to rent out almost anything.

The sector here is still in its infancy but has seen rapid growth over the past year, said the Singapore Sharing Economy Association. The association, which was formed last month by six home-grown companies, estimates that the number of users registered on its members' websites has shot up from 16,800 last year to 34,700 now.

This mirrors the trend's ascent globally: A recent survey by market research group Nielsen showed that revenue earned by consumers around the world by turning personal assets into income via the sharing economy is expected to surpass US$3.5 billion (S$4.4 billion) this year, with growth exceeding 25 per cent. However, the authorities and traditional business operators have accused participants of failing to comply with local laws and regulations governing conventional companies.

In Singapore, two home owners lost their flats last month after the Housing Board found they had let out their units to tourists. Short-term rentals flout HDB and Urban Redevelopment Authority regulations, which state that when a home - HDB or private - is leased out, it must be for at least six months.

Taxes are another complication, given that money often changes hands in sharing economy transactions.

The Inland Revenue Authority of Singapore said it "is aware that the sharing economy has recently become popular in Singapore".

The agency has not come across regulations in other countries that specify rules for income derived from sharing platforms, it told The Straits Times. "(In Singapore), any income from the rental of properties, services provided, or any gain or profit derived from trade, business, profession or vocation will be taxed," said its spokesman.

Mr Eugene Tay, president of the Singapore Sharing Economy Association, said the association aims to work with government agencies to iron out the issues. "We want more people to be aware of the benefits of sharing, and build a more vibrant industry," said Mr Tay, whose company runs Waste is not Waste - an online platform which facilitates the exchange of unwanted items between companies.

Mr James Chua, co-founder of short-term rental platform PandaBed, said rules governing the market in other countries might also work here.

These include issuing licences for a fixed number of residences in each area to run short-term rental businesses, as well as requiring those who rent out their homes for more than a certain number of nights per year to register as a company and pay associated taxes.

There is "too much demand and not enough supply" of Singapore properties on the PandaBed platform, said Mr Chua. There are 400 Singapore homes listed on the site. "Singaporeans are a very 'play it safe' bunch - if there is no clear law, they tend to assume it's against the law," he added.

Existing regulations and legal systems both here and in many other countries do not address new challenges introduced by the sharing economy, said a sharing economy expert, Professor Costas Courcoubetis of the Singapore University of Technology and Design.

This means many sharing economy activities lie in a "grey area" and it will take time for lawmakers to adapt.

The South Korean capital Seoul has embraced the sharing economy, said Prof Courcoubetis. It has passed laws in support of such platforms, incubated and subsidised sharing economy start-ups and promotes itself as a "sharing city". A similar policy could also bear fruit here, he added.

"As Singapore has a reputation of being in the forefront of urban innovation, it would be a pity if policymakers do not move quickly to explore how Singapore can benefit from this new trend of the sharing economy, which will only become more important in the future," he said.

chiaym@sph.com.sg