People are making money from renting out their apartment on Airbnb, making deliveries for Uber or selling their second-hand stuff on Vinted or Marktplaats. But these small entrepreneurs haven’t always declared or paid taxes on the income they make via these platforms. This has resulted in an estimated tax gap of 21.3 billion euros in the EU. ‘That’s of course not the end of the story’, says Vázquez, who wrote his doctoral dissertation on the EU’s response to tax evasion within the platform economy.

What did the EU do to prevent further tax evasion?

‘In 2021, the EU adopted common rules that require digital platforms to report to the tax authorities information about their users. The rules also require the automatic exchange of this data between the tax authorities of different EU countries. If a Dutch teacher is making money tutoring a German student via an Irish platform, that will no longer go unnoticed. It has become much harder to get away with tax evasion within the platform economy. This policy was introduced via an EU Directive called “DAC7”. But naturally, it has its flaws and challenges.’

What's the problem?

‘While fighting tax evasion is evidently a worthy goal, the data collection does create tensions. The government intrudes into the private sphere of platforms and its users. Platforms are burdened with reporting to tax authorities. And platform users have to share their BSN (Citizen Service Number) with  platforms. If you want to fight tax evasion, you only have to know the bare minimum, like what I’m earning, my BSN, but not which products someone is buying. Only the minimum data should be shared with the appropriate authority – thankfully, that is  the case with DAC7.’

Does this mean you now need to give your BSN when selling something on Vinted?

‘In general, yes. But not everyone has to.  If you sell less than 30 items and make less than 2,000 euros annually you are off the hook and no data will be shared with the tax authorities – though your BSN might still be asked by the platform. But if you sell 31 baby items worth 1 euro each or sell your old bike for 2,001 euro, platforms will share your data with the tax authorities. This means that personal data is also shared in cases where tax evasion risks are minimal. It’s important to note, though, that data sharing doesn’t automatically mean that you have to pay taxes.’

What data is shared if you buy second-hand clothes on Vinted?

‘These rules don’t give the government any data about buyers and their consumption habits. So, if you buy controversial political or religious t-shirts online, the tax authorities will not know about it. This policy only concerns those making money via platforms: people renting out their flat, driving for Uber, and so on. Before DAC7, these entrepreneurs used to get away with tax evasion if they did not voluntarily report their income. Now that is no longer possible. But there are still gaps in the current policy.’

Are there exceptions for being reported?

‘Yes, a curious exception is that for people providing a so-called “non-customizable service”. So, if you're an influencer providing fitness or fashion advice via ‘standardized’ content, the income you receive from subscriptions fees or users’ tips won’t be reported to the tax authorities. This is because you are not providing a ‘personal’ service. Similarly, crowd-funding investors or people renting out movable playground games for children’s birthdays are also not covered by DAC7. This means that certain users earning thousands of euros via platforms are not being reported to the tax authorities, but others selling 31 baby items for 1 euro each or their bike for 2,001 are.’

Are you still happy with the policy after doing your research?

‘I strongly support these rules. DAC7 is a positive policy measure and  action was needed at the EU level to address  tax evasion and fragmentation. I found DAC7 generally proportionate. But the measure  still needs improvement. For example, the policy embodied in DAC7 was based on a flawed sample. That’s why some platform users making a significant amount of money online are still not visible to the tax authorities, whereas others making just a few euros are closely monitored. Platforms need to report data about people selling baby clothes, but not about influencers or crowdfunding investors making much more money. Platform businesses are also heavily burdened with compliance, which negatively impact small start-ups.’

What are your recommendations?

‘The rules still need refining. We should adjust the DAC7 scope to target the middle segment of taxpayers. These are the taxpayers that are still making significant money, unlike the baby clothes seller, but are not as visible to the tax authorities as the large retailers. In my view, the best long-term solution would be to adopt a “compliance by design” model, where the necessary data held by platforms is automatically shared with the tax authorities. That way, tax evasion would effectively be addressed, and platforms would no longer be heavily burdened with compliance. Of course, we must first ensure that robust data safeguards are in place. The European Commission is now evaluating the policy. Hopefully, my research will help identify areas of improvement for DAC7.’