Sharing economy – 4.0 economic revolution or labour squeezing business

GV Lawyers would like to introduce an article by Lawyer Tran Huu Tien titled “Sharing economy – 4.0 economic revolution or labour squeezing business ” was posted on Vietnam’s Online Lawyer website on December 10, 2020.

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(LSVN) – In recent times, a tax policy has been passed and attracted public attention, especially those engaged in business models in partnership with technology platform providers that connect customers with service providers such as Grab, Now, Gojek …, whose interests are directly affected. Specifically, the new tax policy under Decree 126/2020/ND-CP, effective from 05 December 2020, identifies all providers of technology platforms that connect customers with service providers will have to declare and collect VAT on all sales at the collected tax rate of 10% (significantly increased from 3% as before).

Sharing economy…

Vietnam is one of the leading countries in Southeast Asia that allows the pilot implementation of the “cooperation with business partners” model that many technology firms are currently applying. This is seen as a typical illustration of the concept of “cooperative economy” or “sharing economy”, which is the term commonly used in the past few years to talk about the business model in which players take advantage of digital technology development, help save transaction costs and reach a large number of customers through digital platforms. Simply put, this is the model in which the operator of the digital system, finds out and brings customers to individual partners. On the contrary, the partner will play the role of performing services (such as passenger transportation, delivery). Revenue is divided according to the agreement.

In light of nature and resultant economic efficiency, “sharing economy” is followed by the expression and at the same time the driving force behind the 4.0 Industrial Revolution to take place strongly in Vietnam as well as in the region. This help change the way of conducting business from manual to technology. It cannot be denied that “Sharing Economy” promotes economy, improves competition and innovation in the market. This model is also considered beneficial in helping platform providers and their partners develop together.

However, is such economy truly sharing?

In recent times, a tax policy has been passed and attracted public attention, especially those engaged in business models in partnership with technology platform providers that connect customers with service providers such as Grab, Now, Gojek …, whose interests are directly affected. Specifically, the new tax policy under Decree 126/2020/ND-CP, effective from 05 December 2020, identifies all providers of technology platforms that connect customers with service providers will have to declare and collect VAT on all sales at the collected tax rate of 10% (significantly increased from 3% as before).

Almost immediately, many technology firms have ignored the tax increase story by announcing a correspondingly increased fee schedule. The revenue share for cooperators is accordingly reduced significantly. Tax increases and fee hikes lead consumers to reconsider the choice of using the service. Once supply decreases, the rate of enjoyment downs, the burden is then placed on the shoulders of “business partners” of these firms.

From the economic perspective, although the technology firms themselves are involved in providing services to customers (as operators), these parties do not have to share any damage from the policy change. This is just one of many examples of the current scenario of a “sharing economy” in Vietnam,both half-hearted and inequal, in which workers are given the title of “partner”, but bear many disadvantages.

Many technology firms, including multinational companies, that already have “techniques” for this business cooperation model cleverly take advantage of the legal gaps to open up and develop profit opportunities. Calling workers “partners”, technology firms automatically remove an interest in such expenses as basic salary, social insurance and other employee benefits. On the other hand, thanks to reasonable costs due to reduced operating costs when applying “Sharing Economy”, technology firms have quickly gained a large market share, directly competing and even overwhelming the traditional enterprises.

With that edge, these firms also have the right to decide all service policies to provide to users, including price list and share rate, even though individual “business partners” are the authentic service providers. Through a matrix of agreements, contracts, terms that “partners”, sometimes as unskilled workers, cannot fully grasp the matter core that many firms have quickly taken ownership of the game. As argued by these firms, the law recognizes business cooperation relationships based on the agreement of the parties involved, provided that it is not unethical or illegal. That sounds right, but …

Workers, with no fixed wages, no insurance, no benefits, no voice and no protection, are clearly resigned to a relationship of sharing without “enjoying something ” from their own partner.

There have been multiple controversies about the authority to guide, the reasonableness and clarity of relationship between technology firms and “business partners”, not to mention discussions on current legal regulations (including recently enacted tax policies.) Vietnam clearly lacks a comprehensive, legal mechanism governing the “sharing economy” between technology firms and “business partners.” For this reason, state agencies are often very confused and passive in the state management of this new but not new field, and more importantly, do not have any instrument to protect workers’ interests when needed.

Workers are always the weaker side in the working relationship. Workers in the “sharing economy” are even more vulnerable when they have to invest money in means and tools to facilitate cooperation with technology firms, even to borrow money. Vietnamese law respects the agreement and voluntariness of the parties to the transaction. However, this does not mean that we should allow excessive liberalization of unequal business concepts and structures that in the long run can affect the interests of workers. Besides, it is clear that technology firms, with “Sharing Economy”, are having great edges in the market game, product prices, but are looking to push the burden on workers. The issue of ensuring fair competition and interests should also be considered so that workers have more choices in finding a really suitable partner.

In Vietnam, the upcoming 2019 Labour Code, which introduces reforms, contributes to blurring the boundaries of cooperation/service relationships between individuals and businesses and labor relations. Around the world, a number of foreign courts and authorities have also identified the technology firms providing the connection platform as the employers. Accordingly, we also expect the more specific and clearer guidance from Vietnamese lawmakers on “Sharing Economy”, especially in the context of important legal documents on investment and business in Vietnam including the Enterprise Law 2020, Investment Law 2020 that will take effect from January 2021.

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