Airbnb is a US company that via its website enables homeowners to rent bedrooms or their properties. It has just given Revenue full details of the rental income of the Irish users of its service. Undoubtedly some of the 4,500 registered users of the Airbnb facility may have felt they were not liable for tax, as the current rent-a-room scheme allows people to earn up to €12,000 tax free annually.
However, Revenue earlier this year clarified matters, by regarding short-term room and property rentals – those that Airbnb mainly facilitates – as a trade, and liable to tax. The rent-a-room scheme, on the other hand, is designed for longer term lettings.
This clarification issued by Revenue was designed to encourage those registered with Airbnb to pay any tax owing. Whether many took the opportunity to do is not clear. Airbnb, however, acted swiftly following the tax ruling, and supplied Revenue with full details of the rental income of its Irish clients. The company has said that it was legally obliged to do so, as Ireland is the company's home base for Airbnb's transactions outside the US. And in the US, the law requires similar disclosure to the tax authorities.
This latest development also serves to illustrate the increased power that Revenue enjoys, and can exercise in ensuring tax compliance, and in more effectively tackling the shadow economy: whether by securing information directly from third parties – banks and financial institutions – or by fully exploiting digital technology.
Three years ago Revenue, having secured access to a national database of pension payments, found that some recipients had failed to pay tax on their pension. It later collected €28 million in taxes and penalties.
How much of this unpaid tax was due to oversight, ignorance of the tax law, or outright tax evasion? Likewise, with Airbnb one can ask similar questions, as Revenue no doubt will, in assessing the tax liabilities of those that have under-declared their rental income.