The Platform Economy and Regulatory Disruption: Estimating the Impact on Municipal Revenue in Toronto

Platform economy firms such as Uber and Airbnb have attracted attention in cities around the world, given the impact of these firms on the existing taxi industry or the rental market, but little has been written about the effects of the platform economy on municipal fiscal health. This paper estimates the regulatory cost and potential revenue opportunities of the platform economy, examining the impact of three firms in Toronto: Uber, Airbnb, and Rover. Overall, I expect that the approaches that the City of Toronto has taken to regulate the activities of firms, such as Uber and Airbnb, will be revenue-neutral. Since neither of these services directly competes with other city services, I examine only the costs of the regulatory scheme put in place. The third platform firm, Rover, does compete with the City’s Green P parking service. However, Rover’s operations are not at the scale necessary to meaningfully disrupt Green P services. If regulated effectively, the platform economy would have a minimal impact on municipal revenue. However, regulatory delay has a cost. The lesson learned from Toronto’s experience is to not delay the creation of a regulatory regime. Municipalities need to be proactive in researching the appropriate regulatory approach and matching the regulatory reach to the platform in question, namely a digital regulatory approach for a digital service.