Shared Economy

Question:

Discuss About The Brutality And Complexity In Global Economy?

A shared economy can be define as an economy where an individual has the capacity to originate or rent resources or services that are owned by some other individual being of that country. It can also be define as economy that shared all the resources and services in interchange of either suitable fees or may be compensation or open among the private individual of that country (Schneider et al., 2015). The system of shared economy is in use since the starting of the society. The process of sharing has been changed during the years but the purpose is more or less the same.  The main objective of the shared economy has always been to enrich and enlightened the lives of the people of the country. Now a days, sharing has now become lot more possible, convenient and easy at a large level due to the introduction of internet in day to day life. In a shared economy there is the emergence of plentiful opportunities where the resources are used by a groups or individual in order to produce money but these things are absent in closed economy (Williams, 2014).

The segment of country’s economic activity that is derived from the sources that fall outside the country’s rules and regulation regarding commerce. The activities can be either legal or illegal depending on what goods and services involve. This is called Black Economy. On the other hand White Economy can be define as such portion of the economy where there is a proper accounts which is abides by the country’s rules and regulation. It is generally opposite of white economy (Schneider, 2015). In Black economy, the economy does not follow the guidelines and protocol of commerce of that country and thus the activity of such economy are not accounted for taxation purpose. An example of such economy is that the illegal weapons trade is the example of black economy. Another example is the payments of workers working in construction site where the workers are working legally but their payments are done illegally through cash so that tax can be avoided by both the workers and the person who is making the payments.

The Uber is a business that operates in Australia under sharing economy and Cab charge is a business that operates under traditional business model. Both businesses operate in the same industry in Australia, i.e. in transport business. The objective of this part of the document is to explain the various aspects associated with the shared economy and more traditional economy and how these aspects influence the business operations of organizations operating under these economy models. As already mentioned in a sharing economy the private individuals are allowed and have the right to use the unused assets for their benefit in exchange of fees or free of costs depending upon the kind of resources or assets to be used. Traditional business model on the other hand is nothing like sharing economy as the assets in tradition economy are only allowed to be used by the owners for their own business and other purposes. These two organizations, i.e. Uber Australia and Cab charge, and their structures shall be discussed to under the characteristics of these two economy models better (Schneider & Kearney, 2013).

Black Economy and White Economy

Uber Australia is a business organization that allows individuals to book cars and cabs according to their needs for travelling and commuting purposes. The concept of business of the company is to allow the customers to use the cars according to their needs by paying due fare. The structure of the business is such that it allows individuals to book ride instantly as well as advance bookings of ride for later periods by using mobile apps and online bookings (Guttentag, 2015). Whether the ride is for short distance or for long distance, the customers have the right to book rides according to their needs and requirements. The assets, i.e. in this case cars and cabs are though owned by the organization itself, i.e. Uber Australia, however, the individuals booking online and by using mobile phone apps can use these assets, i.e. cars and cabs, according to their needs and requirements in exchange of fare. The very premise of Uber is on sharing resources as the business is all about providing private cars and cabs on demand to the private individuals and public of a country. A worldwide business leader in its category Uber according to financial experts have a business turnover of over US$20 Billion however, surprisingly the company has only shown a tax bill of $18000.00 in Australia in its first tax bill in the country. This is quite surprising considering the huge business aspect of the company even in Australia the figure of $18000 seems quite low.

The company, Uber Australia is a ride sharing company and has evolved its business around the globe on the concept of sharing economy. In fact the company’s objective and goals are very much in alignment with the goals and objectives of a shared economy. An economy that allows free sharing of resources and assets owned by each other either in exchange of money or free of cost depending on the nature of resources and assets to be used is a sharing economy. However, there are numerous organizations that are operating in the country which do not believe in the concept of free sharing and follow a different economic model however, that does not take anything away from the positives of a sharing economy (Leigh & Blakely, 2016). The structure of the company, i.e. Uber Australia is very much built on the concept of a sharing economy. In order to achieve an agile economy which is the objective of the Government of Australia including the prime minister of the country Mr. Malcom Turnbull companies like Uber, a ride sharing company, has a huge role to play and contribute to the overall development of the economy in the country. Considering the fact that the Australian economy is one of the earliest to be recognized as a developed economy in the globe it is not surprising to find numerous organizations in the country to operate under the shared economy model.

Uber Australia: A Shared Economy Model

According to a report the company, i.e. Uber Australia has delivered a whopping 5 Million rides in the year 2015 and the number of rides expected to increase in the future. However, the debt structure of the company should rang a bell in the management’s ear. The company though is an important participant in sharing economy model however, the behavior of the company has become more or less align with other multi-national companies in the country. The company, according to an initial report has debt of $980000.00 from related entities which is far in excess of the first annual revenue of the company of $804000.00. According to the tax structure of the country companies with gearing ratio of above 60 per cent are allowed to claim tax deduction for repayments of loans. For a company which believes in the concept of shared economy is claims to be part of a sharing economy the structure of the company and its business model needs to be revisited to ensure that the operational characteristics of the company matches with the concept of shared economy (Kirchgässner, 2017).  

Cab charge is another business organization that is operating in the same industry as that of Uber Australia however, the business models and relevant economy models of the two organizations are completely different. Though both, Uber Australia and Cab Charge, are in the business of transport but the economy models of the two organizations are completely different. Whereas Uber Australia is an important constituent of shared economy model, Cab charge on the other hand is another organization which operates in more traditional way under traditional business model. Cab Charge as already mentioned works in more traditional business economy where the sharing concept is not followed (Meng et al., 2013). In a traditional business model unlike the sharing economy the private individuals have no right to use the resources and assets which are owned by others at free of cost. The customers in a traditional business model will have to make payments for each and every resources and assets to be sued for their own benefits. Cab charge is an organization that operates in transport business in the country following the characteristics of traditional business model.

Cabchrage Australia Limited is a company listed in the Australian stock exchange and is an ASX 200 company since December, 1999. In the year 1976 the company established a payment system using which the customers can make account payment to the company for using the services of the company. In a joint venture with ComfortDelGro the company took 49% interest in Comforthdelgro cab charge. The company operates by taking booking services and dispatching services in exchange of fare in taxis in Australia. At present the company covers an astonishing 7000 taxis all across the country and is one of the largest cab service providers in the country (Winer et al., 2013). Despite the influx of competitions especially after the globalization the company has still been able to hold on to its major share. The management team and the executive committee of the company deserve a huge credit for the same. The company’s cab charge payment system however, have come across number of criticisms from the regulatory bodies of the country. In fact there have been numerous proceedings against the company for its alleged anti-competitive practices. In the year 2010 a Federal court proceeding was started for alleged anti-competitive practices including predatory pricing by the company which resulted in one of highest fines for any companies in the history of Australian economy and the company was forced to pay a fine $15 Million in settlement for its anti-competitive practices.

Cab Charge: A Traditional Business Model

In the year 1976 Cabcharge Australia Limited introduced an alternative payment system to cash payments for availing the services of the company. This brought about a huge revolution in the taxi industry as it got an alternative of cash payment system. The principle activities of the company includes the following:

Businesses and individuals can make account payments instead of cash payments for using the cab services of the company. The company was one of the first companies to introduce non-cash payment facility in taxi industry (Kuehn, 2014).

The company has point of sale system that allows the customers to make payment for availing the taxi services by using third party charge, credit cards, debit cards and products of car services.

1. The company offers taxi booking and dispatch services.
2. Development of hardware related to taxi services such as taxi security camera systems, taxi meters to account for the mileage, and other transaction processing equipment.
3. Apart from the taxi services the company also runs buses and coaches in New South Wales and Victoria through joint venture business with its joint venture partners.

The company operates in the traditional business model segment and thus, the main objective of the company is to maximize the profit from its operating activities. The company has been quite successful in operating taxi and other services over the years. Especially after the introduction of its non-cash payment system in the year 1976 the turnover of the company has increased significantly. However, with the increase in turnover there have been increase in controversies too (Summers, 2014). The company has found itself against the wrong side of numerous court proceedings; in June 2009 the Australian Competition and Consumer Commission started proceedings against the company alleging that the company has breached numerous fair trade practices and have violated competition rules to gain unjust advantage over its competitors in the market. ACCC began court proceeding in the Federal Court of Australia for alleged misuse of its power in the market to arbitrarily set prices to gain advantage over its competitors in the marketing. The court case was settled after the company agreed to three contraventions of trade practices (Allan et al., 2014).

The sanction made by the Treasury in Black Economy Taskforce Interim Report says that through investigation sanction would be successful in order to decrease the involvement of shared economy to the problem of black money recommendation must be followed as in the report (Sassen, 2014). To decrease the influence of shared economy towards black money Treasury of Australia has made reference which are as follows.

1. As of Australia maintain decent tax record so such firms are permitted to access to the procurement prospects.
2. In order to motivate the business organization for following the same path, small business and organizations are to be allowed to receive incentives by them who has made investment in non- cash business.
3. It is extremely essential to increase the Taxation Payment Reporting system.
4. Payment method of contractors, payment of wages in case should be controlled in order to keep the provision for tax deductibility hassle of payments (Pickhardt & Sardà, 2015).
5. The technology which are used to over power or destroy the sales figures must be banned.
6. The business registration can be enriched through transformation steps of integrity.
7. To the small business organization and small corporation essential and important training must be given which are related to taxation so that they could understand the process and thereafter apply its benefits in their own business.
8. Based on the activities of Australian Taxation Office, funding must be increased.
9. Regulatory taxes shall be deceased so that the small business firms are not over loaded with too much requirement of law.
10. Limitation on cash payment shall be forced across the country for attaining better tax expansion across the country.
11. A sharing economy that has reporting rule could be introduce in order to ensure well and better system of taxation.
12. GST threshold must be reduced.
13. Lowering of Reprieves of utilization.
14. Introduction of Phoenix taskforce is essential.
15. Reforms of beneficial ownership.
16. Withdrawn of excess arrangement that are not necessary.
17. The Government agencies must utilize with efficiency the document’s privacy that must be increased.

It is essential to implement the recommendation effectively in order to gain the goal of Black Economy taskforce. If the recommendations proposed by Treasury it should be implemented properly so that the desire objective would reduce the contribution of shared economy towards black economy (Enste 2015). The objective that will aid the government are listed below.

• Arrangements must be withdrawn which is not necessary and regulatory condition’s must be increased.
• Reprieves should be limited or reduced
• Introduction of Sharing Economy Reporting Regime.
• No paying of cash incentives shall be increased
• Across the country cash based payments must be reduced or diminished.
• The small business and firms should reduce the regulatory burdens.
• Training should be there for small firms and business employers so that they bear by requirement of tax.

Reference

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