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Airbnb and Booking targets of G7 push for higher taxes for multinationals and EU focus on restraining gatekeepers

Airbnb Booking taxes
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Property managers and vacation rental owners operate businesses that are fundamentally local. As such, they pay taxes in the cities, regions, and countries where they operate. The story is different for vacation rental listings sites such as Airbnb and Booking: In Europe, host fees and partner commissions paid by local property managers flow directly into countries with lower taxes, such as Ireland (corporate tax rate: 12.5%) for Airbnb. Most often, these big companies manage to negotiate so-called sweetheart deals, by which they actually pay a lower tax rate than the official one. These companies also benefit from advantages put into place by national states to attract digital giants. For example, Booking.com gets large tax breaks from the Dutch state: Parts of the company’s income is taxed at 7%, not the regular 25% corporate tax rate, as part of standard regulation to encourage “innovation”.

Let’s be clear: None of this is illegal. Yet, digital platforms are coming under pressure due to a combination of new proposals, laws, and public opinion concerns. We will consider:

  • the G7 summit and its call for a global minimum corporate tax rate of 15% and multinationals to pay more taxes where they sell services,
  • the EU’s Digital Services Act which may see Airbnb and Booking.com as gatekeepers that hinder competition and need to be restrained,
  • public opinion, which for instance pressured in June 2021 Booking.com to pay back the €65m it received in COVID-19 financial support after it emerged that the company had later given a €28m bonus package to three top executives.

G7’s 15% global minimum corporate tax rate and push for multinationals to pay more taxes where they make sales

airbnb corporate tax ireland

The June 12-13 G7 summit discussed two measures that could hit the FAANGs (Facebook, Amazon, Apple, Netflix, and Google) as well as Airbnb and Booking.com:

A global minimum corporate tax rate of 15% (-> Airbnb’s European HQ is in Ireland, where the maximum rate is 12.5%)

The G7’s final communiqué vows for “a fairer global tax system that reverses the race to the bottom“. It reflects US President Biden’s push for a global minim corporate tax. The G7 countries agreed on a 15% minimum. Note that the measure needs to then put into law in each of these countries.

Airbnb and TripAdvisor’s European activities are headquarters in Ireland, where the official rate is 12.5%. The companies may or may not have sweetheart deals by which they actually pay less. The Irish government considers G7’s move as a threat to its national interests.

Multinationals to be pay taxes in their biggest markets (-> Airbnb and Booking to pay more taxes in Germany and France?)

Multinational companies would have to pay more tax wherever they sell products or services. Companies could be taxed in any country where they make more than 10% profit on sales. Above that point, the company would have to pay 20% tax. This is a move that large EU countries such as France and Germany support, but is not popular with smaller ones such as Ireland, Luxembourg, and The Netherlands: The bigger countries are usually where the money is made and the smaller ones where it is taxed.

For instance, in 2016, Airbnb paid €100,000 in tax in France despite having more than 10 million users in the country at the time. Outside of the travel industry, let’s look at Facebook. According to the BBC, the social network company, which has its international HQ in Dublin, paid in 2018 £28.5m in tax to the UK, although its local revenue was £1.65bn.

Markets like France and Germany make up a big part of Airbnb and Booking.com’s sales. France is Airbnb’s #1 destination after the US, while the 80+ million Germans are keen users of Booking.com.

A key question could be where the sale is made: Is it where the guest is located or where the host property is? Booking.com and Airbnb may be a bit different here.

  • Booking.com has no guest fee. The commission is paid by the host / partner. The company often refers to itself as an advertising channel for hotels and vacation rentals. Then, it would make sense that the revenues made from bookings of French properties be considered French.
  • Airbnb has two models. Its 15% host-only fee model is similar to Booking.com’s. Yet, its split-fee model, whereby a host pays a 3-5% commission and the guest an average 14.2% commission, looks different. Countries like France, which are big for Airbnb in both supply and demand, may be above the 10% sales threshold that will trigger local taxation.

From the EU, with love: Airbnb and Booking.com vs The Digital Services Act and the new Digital Levy

airbnb digital services act

The European Union too has taxes on digital companies on its mind. It also wants to regulate the FAANGs, and potentially Booking.com and Airbnb, as gatekeepers that concentrate too much power and stifile competition.

For property managers and individual owners, the impact may not seem immediate. Who could be against fair competition? Yet, these new regulations could result in:

  • More complexity for hosts listing their properties on large platforms. If you are a European, you may remember that both Airbnb and Booking.com asked you, in early 2020, whether you were private or a business host, due to new EU Consumer Protection Cooperation regulations. Hosts may have to share more data.
  • Municipalities and governments getting more access to host data from the big platforms. Cities have been pushing Airbnb and Booking to share more data on hosts, lengths of stay, revenues, total nights booked per host, etc.

Are Airbnb and Booking.com gatekeepers who prevent fair and open digital markets?

The Digital Services Act and Digital Markets Act encompass a single set of new rules applicable across the whole EU to purportedly create a safer and more open digital space.

The Digital Markets Act includes rules that govern gatekeeper online platforms. Gatekeeper platforms are digital platforms with a systemic role in the internal market that function as bottlenecks between businesses and consumers for important digital services. Both Booking.com and Airbnb could be considered gatekeepers, depending on who the relevant digital markets are defined.

When the EU presented its initial work on the Digital Markets Act, this is how EuroCities, a coalition of European cities, interpreted the text:

  • City administrations will be able to issue orders to act against illegal content – for instance, illegal short-term housing advertising,
  • City administrations will be able to set up data-sharing obligations on intermediary service providers, so as to monitor their compliance with EU, national and local laws.
  • The regulation opens the door for municipal governments and big online platforms providing intermediary services to set up specific code of conducts so as to ensure adequate cooperation arrangements.

Airbnb’s response to the Digital Services Act: We are not an advertising platform and do not burden hosts with too much red tape

In June 2021, Airbnb published a 6-page update on its position vis-à-vis the Digital Services Act. Among other points, Airbnb argues that that act needs to define “Very Large Online Platforms” or VLOPs. The company thinks that large sites such as Google and Facebook whose revenues come from advertising have a different model from sites like Airbnb and Booking that make money from taking a commission on a transition. As such, their obligations should not be the same.

For a platform generating revenue strictly via transactions, such as Airbnb, an “active recipient
should be understood as those Hosts and Guests actually transacting (i.e. making a booking) on the platform. Individuals merely visiting or searching on the platform should not be considered “active recipients” of the Airbnb service. Ad-based platforms on the other hand generate influence and value as a result of site visits and views, rather than transactions. This distinction should be reflected in the definition of “active recipient” to ensure legal clarity for platforms and a more effective approach to staggered due diligence obligations, depending on the size and actual reach of the platform.

Airbnb also wants the Act to not overwhelm individual hosts with yet more declarations and data collection. Otherwise, it may deter non-professionals from listing their properties.

Data collection requirements under the DSA should remain limited to traders active on our platform — as the Commission proposal indicates. Mandating the collection of a range of sensitive data from any and all Hosts (both traders and non-traders) providing services on the platform would place significant burdens on those individuals renting their space on an ad-hoc basis, and may discourage non-professional Hosts from listing or transacting on the platform at all.

Booking.com’s position on the Digital Services Act: Be bolder against illegal hosts

Booking.com thinks that the text is not bold enough, at least when it comes to addressing “illegal short-term holiday rentals.”

On its blog, the Booking.com Public Affairs team starts boldly, by stating that

The powers for national (or local) authorities to order platforms to remove illegal content (Article 8) and to share information (Article 9) are a step in the right direction. However, enforcement loopholes remain. Where short term vacation rentals are subject to an authorization /registration scheme, platforms should be required to ensure that only properly registered / authorized properties are listed. This is in line with the duty of care incumbent upon platforms.

You can guess which naughty platform allowing illegal hosts our law-abiding Booking.com has in mind? A hint? It started with Air and finishes with BnB.

Just like Airbnb, Booking.com thinks that

  • the text should treat commission- based business models (i.e. Booking.com and Zalando) differently from advertising-based platforms
  • the definition of Very Large Online Platforms (VLOPs) is too vague.

A new EU tax: The digital levy

The idea behind the digital levy is to tax digital businesses because their business models can give them unfair advantages compared with traditional sectors.

Let’s not get into details here, but it would be a new tax on the likes of Airbnb and Booking.com.


Popular / populist pressures on Airbnb and Booking.com?

booking.com bonus outcry

Property managers and cities love to hate Airbnb and Booking. But public opinion can also turn against the large vacation rental listing sites. International critics argue that national states are competing to attract big companies and are ready to lower taxes to do so. Yet, national public opinion, in these very countries, may not be the biggest fans of digital giants.

For instance, Booking.com, whose global HQ is in Amsterdam, is not always very popular with the Dutch press. For good and bad reasons.

Booking.com pays back state support after awarding €26M bonus to three executives

In Spring 2020, Booking.com chose to apply for state support in the UK and in The Netherlands. The pandemic was battering booking revenues. The Dutch state gave €65M to Booking.com. The money was supposed to help pay for employee salaries. Already at the time, the Dutch press was not too happy to see a “rich” company, with alledged sweathear deals with the Dutch tax office, receive public money.

In May 2021, Booking Holdings, Booking.com’s parent company, revealed that the total remuneration for the three-member U.S. board of parent company Booking Holdings last year converted to more than 28 million euros. Some 5.8 million euros in shares and cash went to CEO Glenn Fogel, and 2.8 million euros went to Peter Millones, the vice president. Nearly 20 million euros, mostly in shares, went to CFO David Goulden.

The Dutch press, from left to right, has very acid things to say about the matter. It was even discussed publicly at the Dutch Parliament. In early June, Booking.com decided to repay that €65 million it had received in state aid.

Conclusion: Why Airbnb and Booking.com invest so much in public affairs

Stakes could be high for large platforms if digital multinationals are more heavily taxed. Airbnb is keen on pointing out its efforts to address public concerns.

For instance, it has recently launched The Great Rebalance of European Travel, a series of commitments to work with communities in Europe to help rebalance tourism following the pandemic. It even supports the regulation of short-term rentals and wants to prevent the return of overtourism.

Airbnb also points at its City Portal to help support any future harmonised regulatory framework, and we are already introducing this tool in destinations across Europe.

Large platforms understand that they must have a voice in how regulations are made. Property managers and hosts should also know what happens to the fees they pay and that, utlimately, power the success of the digital giants.

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Rental Scale-Up

Thibault is the founder of Rental Scale-Up. He owns vacation rentals in St. Barths and Bali. He also leads innovative projects for companies within the vacation rental industry. Feel free to reach out to Thibaut Masson on Linkedin.

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