Ottawa examines challenges of ‘disruptive’ expanding sharing economy
The federal government quietly completed an in-depth report on the so-called sharing economy — and found both significant challenges and significant opportunities.

TheStar.com
Feb. 1, 2016
Alex Boutilier

Companies like Uber and Airbnb were the subject of a quiet in-depth study by high-ranking federal bureaucrats, the Star has learned.

A committee of five deputy ministers and a team of analysts undertook a comprehensive study of the so-called sharing economy and its implications for Canadian policy-makers and consumers.

The study, delivered to the committee in February 2015, found significant challenges for government regulation of the notoriously slippery and ever-expanding industry of ride sharing, apartment renting and other peer-to-peer transactions.

“The fact that the sharing economy will create winners and losers is obvious,” the report reads. “What remains to be determined is what the overall impact will be on Canadian society and the degree to which proactive government responses can positively shape the outcomes of sharing economy.”

The report listed three broad areas of concern: the economy, labour and social issues and “privacy, health and safety.”

Its authors noted that Canada’s social safety net — including the employment insurance and old age security systems — may need to be “redesigned” to meet the needs of sharing-economy workers. Likewise, the risk of unreported income from those workers could lead to tax compliance issues and, eventually, a hit to social services.

Governments will also need to grapple with how to apply labour laws — such as minimum wage — to complex, part-time activities, as well as figure out how to ensure sharing economy workers are protected by insurance.

“For instance, in most cases, sharing-economy companies do not provide insurance, benefits, or training to their workers,” the report reads. “This shifts the risks onto individual sharing economy workers who remain unprotected and unsure of their rights and responsibilities.”

But the deputy ministers were also cautioned against attempting to overregulate the industry — both because it could stifle the rapid innovation in the field, and because overburdensome regulations could push the sharing economy “fully outside the government’s control.”

Interviews with sharing economy proponents and public servants in Ottawa instead suggested the federal government accustom itself to the new “reality,” tailoring their approach to benefit sharers and re-examining their relationship to entrenched industry groups.

Sharing economy startups have been a headache for municipal and provincial governments, who have long grappled with the popularity of companies like Uber and Airbnb that don’t easily fit within existing government regulations.

Some Canadian cities have taken an aggressive stance towards Uber — a “ride sharing” service where people exchange money for transportation — at the promptings of the traditional taxi lobby. In Ottawa, city hall has levelled tens of thousands of dollars in fines against Uber drivers. Calgary sought and received a court injunction to prevent Uber from operating, although city hall and the company have agreed to further discussions.

In Quebec, the provincial government is looking to crack down on AirBnB, a popular service that allows people to rent out their apartments or homes to travellers, often at a fraction of the price of a hotel room.

On the one hand, what’s at stake in these cases is not just hotel tax revenue or taxi fares, but government’s ability to regulate these services and ensure health and safety rules are followed.

On the other hand, these “disruptive” companies are unlikely to go anywhere in the immediate future, given their popularity with customers.

Throughout this little drama, the federal government has remained largely offstage. But there are signs that could soon change.

Buzzfeed Canada recently reported the Canada Revenue Agency, one of the five departments conducting the study, has sued Uber to get access to the company’s books. According to court documents, CRA has been after Uber’s books since February 2015 to ensure the company is complying with the Income Tax Act.

Uber spokeswoman Susie Heath downplayed the audit, calling it a “routine tax audit,” and said the company was co-operating with federal authorities. Heath also said Uber informally submitted information to the federal working group last year.

“Every day we work with officials across Canada at both the municipal and provincial levels and we would certainly welcome working collaboratively with the federal government as they examine the implications of the sharing economy at a national level,” Heath said in an email.

While the sharing economy poses challenges to governments’ existing regulation and enforcement efforts, the report concludes that there are also significant opportunities. Global revenues from the sharing economy are expected to increase from $15 billion in 2013 to $335 billion in 2025, making the industry a substantial economic contributor.

There are also opportunities for the government to cut costs on business travel by allowing public servants to rent from Airbnb, or to travel between meetings using cheaper (and easier to track) Uber rides rather than taxi chits. The report even hints that Ottawa could get into the sharing business itself.

“For example, the government could … find user-friendly ways to share its physical assets with local residents, communities and businesses when the assets are not in use,” the report suggests.