Germany seeks Airbnb Ireland’s help to catch tax evaders

German tax officials want Airbnb to surrender all data on its German users to track down tax evaders, and have asked Irish authorities to help, a spokesperson from the Berlin finance administration has said.

“Hamburg has turned to Airbnb Ireland after Berlin had decided that Airbnb Berlin was not responsible” for the information, the spokesperson said, referring to the European headquarters of the American company. “Hamburg has now tried in co-ordination with Berlin and the other federal states to find another way and addressed a request for information.

“The expected delivery of data and information will then be made available to all of the federal states,” the spokesperson added.

It’s a symbolic move by German tax authorities, tax lawyers said. Authorities expect Airbnb to issue a settlement for users’ unpaid income and value-added tax rather than subject them to audits by German authorities, which will help protect its image and business model within the country and Europe.

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Such a workaround, however, will likely have a ripple effect across Europe, attorneys said. With Germany leading the charge against such platforms to recover back taxes, the move could spark similar pushes by countries such as Italy and Spain to go after Airbnb and other firms operating in the sharing economy.

“This will affect all sharing platforms,” Istvan Cocron, a founding partner with CLLB law firm in Munich, said. “Often it’s that Germany takes the first legal steps in a new direction and other countries follow. There are definitely other countries with more financial tax problems than Germany has, such as Spain and Italy, for example, where more people book Airbnb for their holidays.”

Debate

Airbnb and other sharing-economy platforms such as Uber Technologies have been at the centre of various legal fights in Germany over the years, particularly regarding platforms’ disruption of regulations in traditional sectors such as hospitality, housing and transportation.

Airbnb in particular has faced ire from German authorities for its alleged role in inflating housing shortages in urban centres such as Berlin and Hamburg, and for the failure of its users to declare and pay VAT on the extra income they earn over the platform, Thomas Eigenthaler, the president of Germany’s Federal Taxpayers’ Association, said.

In Berlin, for example, Airbnb’s activities have been severely constrained. Since 2014, the rental of entire apartments in Berlin via Airbnb is only allowed if the apartment is registered with the relevant authorities in order to prevent such entrepreneurial endeavours from eating up the housing market.

“In a tight housing market like Berlin, the topic of apartments is important. On the other hand, it falls into the overall complex nature of the digital economy, which should not be permitted to escape taxation,” the spokesperson from the Berlin finance administration said.

Audit

German tax authorities are attempting to mobilise a calculated audit against serial offenders so as to identify patterns of tax evasion over Airbnb, while also getting a better grasp of the scale of the issue, Mr Eigenthaler said.

“These are the most relevant questions, but it all depends on how Airbnb responds,” he said, adding it would “most definitely damage Airbnb’s image if there’s a perception that they’re taking part in tax evasion in Germany”.

The effort is in line with Germany’s quest to get tech companies to pay the taxes they are liable for in domestic jurisdictions, even though they may not have a physical presence there, a spokesperson from Germany’s Federal Ministry of Finance said.

“Should companies do a significant part of their business in a jurisdiction, the absence of a physical presence in that jurisdiction should not result in the profits accrued by them there not being taxable there. Digital platforms and markets should report relevant information to the relevant tax authorities, and this information should be shared between tax jurisdictions in accordance with international tax law,” the spokesperson said.

“International efforts to clarify and standardise legal and technical standards on tax treatment and information sharing are ongoing,” the spokesperson added.

Welcomed

The effort is welcomed across the political spectrum in Germany.

“If there is a real suspicion that taxes have not been paid in Germany, then it is right to ask for more information in Ireland,” Lisa Paus, a Green Party lawmaker in the Bundestag, the lower house of parliament, said.

“Income, whether from leases or other sources, must not be concealed from the tax office.

“I assume that Ireland will collect the requested information from Airbnb and exchange it with Germany,” she added.

“Should the request fail, the information exchange rules should be urgently reviewed and adjusted.”

When asked about the request by German authorities to Ireland, a spokesperson from Airbnb said that it “frequently reminds hosts to check and follow tax rules, send email reminders and have downloadable transaction histories for hosts”.

Airbnb hasn’t received formal notice of the request, the spokesperson added.

Airbnb has entered into tax agreements with some 370 jurisdictions around the world and collected and remitted more than $592 million in hotel and tourist taxes. – Bloomberg