Lankan gig economy lacks level playing field as foreign players not subject to local regulations and tax laws

The Sri Lankan gig platforms are at a disadvantage over their foreign counterparts, who have their operations here, as the former comes under regulatory scrutiny and local tax laws while the latter is not, says the Central Bank.

While the issue has come under some scrutiny in the past, regulatory or policy redress did not come about either due to authorities’ preoccupation with other issues or the gig economy then wasn’t a force to be reckoned with.  
However, the matter has now returned with force, due to the fast sprawling nature of the gig economy and its outsize nature in the present context with COVID-19. 

“…gig platforms, which are operating worldwide, despite being based in a particular country, are difficult to be controlled by the host country’s regulatory environment and taxation system, in the absence of local business registration,” the Central Bank said in a special report.   

“In contrast, the local platforms are under regulatory scrutiny and are liable for local taxes. Such differences in the applicability of regulation will not ensure a level playing field for local operators,” the authors of the report said.
While there are many gig platforms—both local and foreign—in operation in Sri Lanka, the ride-hailing and delivery platforms such as PickMe and Uber, are at the forefront, given the essential nature of 
their business. 

In an earlier report, PickMe Founder and Chief Executive Jiffry Zulfer raised concerns over the lack of a level playing field in the marketplace, due to them having to make a sizeable Value-Added Tax (VAT) payment, putting them at a huge disadvantage, when the others do not. 

The gig economy involves one’s labour, professional expertise or any other service, for a fee, often operating as a freelance worker or an independent contractual worker. 

While the gig economy was prevalent ever since people started working, it became fashionable with the advent of new digital platforms and online market places, which do the matchmaking between those who seek some service and one who is willing to offer to provide it, as an independent contractor or consultant. 

The platform operator retains a fee or a commission for the role of the middleman.  

Technology and digital platforms such as ride-hailing platforms, sharing platforms and online freelance platforms, give a tremendous flywheel to the gig economy, to give its recent rapid ascendancy to where it is today. 

While the gig economy has empowered people who seek freelancing or independent contractual working, it has also thrown several challenges to the same independent contractual workers and governments around the world in areas of absence of worker protection. 

This became evidently visible during the pandemic, where these workers had to be looked after by the government, as there was no employer-employee contract between the gig platform operator and independent contractual worker. 

While the State of California in the United States brought in legislations early this year to limit these platform operators to classify workers as independent contractual workers, which these platforms did as a way to get away with the need to providing their workers with paid leave, minimum wage and the entitlement for social security, such as contributory retirement benefits. 

Sri Lanka’s labour commissioner earlier this year said they are also planning to bring similar laws to make the employers responsible for the freelance workers and independent contractual workers, whose services are obtained to help keep their platforms in business.