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Taxation of Workers in the Gig Economy: World Practice and Challenges for Ukraine

Author

Listed:
  • Liudmyla Kozarezenko

    (Kyiv National University of Trade and Economics, Kyiv, Ukraine)

  • Iryna Tochylina

    (State educational and scientific institution 'Academy of Financial Management', Kyiv, Ukraine)

Abstract

The gig economy is a relatively new phenomenon and is characterized by the fact that the availability and rapid spread of temporary, flexible jobs is becoming commonplace, and employers prefer hiring independent contractors and freelancers instead of full-time employees. The spread of the gig economy significantly affects the development of labor relations and relates primarily to the payment of taxes by individuals working as freelancers. Therefore, such individuals must accrue and pay taxes on their income on their own. The purpose of the article is to study the degree of influence of changes (in particular, changes related to the spread of employment through digital platforms) occurring in the labor market on the taxation and tax revenues of governments as well as provide proposals on motivating freelancers to work in the official sector, voluntary registration by payers and payment tax liabilities in full. The main trends in the labor market based on the hypothesis of the rapid growth of the gig economy in the future were considered. Based on the simulation, an assessment of the potential impact of the identified trends on tax revenues of local budgets in Ukraine was made. It was shown that the share of self-employed people in Ukraine is 15 % of the total number of employed people aged 15-70 years, which corresponds to the European trend. A comparative analysis of the tax regimes used in the world and in Ukraine regarding self-employed persons and freelancers in terms of encouraging them to pay taxes voluntarily was carried out. Suggestions were given regarding the regulation of the labor market in Ukraine and the specifics of taxation of self-employed persons in the context of the spread of the gig economy. It was substantiated that the creation of the so-called "umbrella companies", which will take on the role of employers for freelancers and freely hired workers, and will process of most documents, including those related to the payment of taxes, can have a positive effect on the completeness of taxes paid by participants of the gig economy.

Suggested Citation

  • Liudmyla Kozarezenko & Iryna Tochylina, 2019. "Taxation of Workers in the Gig Economy: World Practice and Challenges for Ukraine," Oblik i finansi, Institute of Accounting and Finance, issue 3, pages 82-94, September.
    • Handle: RePEc:iaf:journl:y:2019:i:3:p:82-94
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    References listed on IDEAS

    as
    1. Katharine G. Abraham & John C. Haltiwanger & Kristin Sandusky & James R. Spletzer, 2017. "Measuring the Gig Economy: Current Knowledge and Open Issues," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, pages 257-298, National Bureau of Economic Research, Inc.
    2. Nataliya Synyutka & Anatolii Lutsyk, 2018. "Transformation of Fiscal Policy and Fiscal Space under Conditions of Digital Technologies Expansion," Oblik i finansi, Institute of Accounting and Finance, issue 4, pages 108-113, December.
    3. Abi Adams & Judith Freedman & Jeremias Prassl, 2018. "Rethinking legal taxonomies for the gig economy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 34(3), pages 475-494.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Elena Smirnova & Igor Okhrimenko & Aleksandra Zakharova, 2024. "Review of Best Practices in Self-Employment Taxation," Public Organization Review, Springer, vol. 24(1), pages 299-314, March.

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    More about this item

    Keywords

    gig economy; personal income taxation; freelancers; self-employed people; small and micro business; compliance with tax laws; simplified taxation regimes;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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