The Straits Times says

Taxing but necessary regulation

There was a sense of comeuppance among some after a call by the Inland Revenue Authority of Singapore (Iras) for ride-hailing firms to automate the supply of income information relating to their army of 40,000 private-hire drivers. Critics of the start-ups (sometimes viewed as upstarts) claim Uber and Grab dodged full regulation by insisting they were not taxi or private-hire car operators but tech innovators, when they appeared on the scene in 2013. Even the Land Transport Authority had once concurred they were merely "providing a matching service leveraging on technology".

Since then, the fleet size of Uber's Lion City Rentals has reportedly grown to almost 10,000 cars, and Grab is now doing its utmost to induce cabbies to defect from market leader ComfortDelGro. A lay view posits that it is because disruptors and incumbents are still not on a level playing field that the former have made gains while the latter's fortunes have faded - Comfort's stock, for example, has seen declines of late. From that perspective, any moves to harmonise the income tax treatment of cabbies and private-hire drivers are timely. These ought to be part of a larger set of measures which governments ought to work out to regulate digital economy players.

In working with Uber and Grab, the Iras is doing no more than what it has done with other organisations which have a substantial number of workers with fluid incomes, like real estate and insurance agencies. One goal is to transmit income data electronically so that tax filing can be simplified. While all workers in the gig economy must pay their dues - as taxes underpin government spending in a wide range of areas that sustain all economic players - the tax authorities tend to be more focused on large entities and processes reflective of disruptive technologies and digital business models. Getting more to e-dispatch income information is relatively simple compared to, say, persuading transaction platforms to collect and forward certain taxes - in the way Airbnb voluntarily handles tourist or occupancy taxes on behalf of hosts, rather than brush this off as an individual's responsibility.

With disruptive innovation changing the way the world works, tax professionals are also finding themselves in the path of disruption, notes multinational professional services firm EY (formerly Ernst & Young). In the private sector, they have to keep pace with an organisation's "rapidly digitalising, globalising business lines and operations"; while in the public sector, they are involved in "digitalising their tax administrations and updating tax policy for a virtualising, borderless business world". Just as technology might be used to mask instances when tax is payable, it should be shrewdly harnessed to ensure the burden of taxes is spread equitably and not just borne by incumbent players.

A version of this article appeared in the print edition of The Straits Times on September 23, 2017, with the headline 'Taxing but necessary regulation'. Subscribe