GV Lawyers is pleased introduce an article written by our Associate Lawyer Tran Huu Tien titled “Sharing economy – a piece of the 4th industrial revolution or a new form of workers squeezing” posted on website of Vietnam Lawyers Online on 10 December 2020.
(LSVN) – Recently, a tax policy newly enacted has been attracting public attention, especially from those whose interests are directly related. Those are the persons/entities who take part in the business models that provide the partnership with operators of the technology platform connecting customers with service providers such as Grab, Now, Gojek, etc. Specifically, Decree 126/2020/ND-CP taking effect from 05 December 2020 identifies that operators of the technology platforms that connect customers with service providers will have to declare and collect VAT on all sales at the flat tax rate of 10% (significantly increased from 3% as before).
The economy of sharing
Vietnam is one of the very first countries in Southeast Asia permitting the pilot implementation of the so-called “cooperation business model” which various technology firms are using for define their current businesses. This is a typical illustration of the concept “cooperative economy” or “sharing economy” – the term commonly used in the recent years to describe the business model taking advantage of highly developed digital technologies to help saving costs and reach a large number of customers through digital platforms. Simply put, this is where operators of the digital platforms look for and brings customer to their individual business partners. In return, the individual business partner will play the role of performing services (such as carrying our passenger transportation, food delivery, so on so forth). Profit is then shared based on the parties’ agreement.
Given the nature and the resultant economic efficiency of “sharing economy, it is viewed an expression and also a strong push to the 4.0 industrial revolution now taking place in Vietnam and in the region. This helps to change the method to perform business, from manual to applying technology. It is undeniable that “sharing economy” will promote the economy through improving competiveness and creativity in the market. It is also considered beneficial to both sides including the platform operators and their partners as they are able to develop their businesses altogether.
Recently, a tax policy newly enacted has been attracting public attention, especially from those whose interests are directly related. Those are the persons/entities who take part in the business models that provide the partnership with operators of the technology platform connecting customers with service providers such as Grab, Now, Gojek, etc. Specifically, Decree 126/2020/ND-CP taking effect from 05 December 2020 identifies that operators of the technology platforms that connect customers with service providers will have to declare and collect VAT on all sales at the flat tax rate of 10% (significantly increased from 3% as before).
Like immediately, a number of technology platform operators have taken their steps out of the said tax increase matter through announcing new fee rates which are increased accordingly. The profit share to be distributed to their business partners is thereby reduced significantly. Tax increased, fee hiked, consumers then have to reconsider their choices. Use demand goes down, profit is lower, the burden will be placed on shoulders of the “business partners” eventually.
From the economic perspective, despite that the technology firms themselves are involved in the process of providing services to customers (as operators), they don’t share any damage resulted from the policy change. This is only one of many examples of the situation of “sharing economy” in Vietnam, ridiculously one-sided, where workers, given the title of “partners”, are the only party suffering from the inequality.
Many technology firms, including the multinational corporations that already have “techniques” in the field of the business cooperation model, have taken advantage of the gaps in law to develop their profit opportunities. Calling workers “partners”, these firms will not need to care about most labour expenses, for example: basic wages, social insurance premiums and other labour benefits. With the competitive fee rates provided thank to the reduction of operation costs upon taking “sharing economy”, these technology firms could rapidly gain a large market share, directly competing and even overwhelming the traditional enterprises.
Given those huge advantages, these firms also take the position to decide the policies on service provision to consumers, including the pricing and the profit rate, even though their individual “business partners” are the absolute providers of such services. Designing a matrix of various agreements, contracts and detailed terms and conditions that the “partners” sometimes cannot fully grasp, these firms can quickly take control of the game. They explained that this business model is accepted by the law as it is based on the agreement of the involved parties and is not unethical or against any regulation. That is supposed to be the right thing.
It is showing clearly to us that the workers, who are working with no wage, no insurance, no benefits, no voice and no protection, are completely losing in the relationship of sharing but there is no sharing from their partners.
Not mentioning about the relevant regulations of law (including the tax policy newly issued), which are still in controversial as to the issuance authority, the practical application and the transparent of the relationship between the technology firms and their “business partners”, Vietnam is lacking a comprehensive legal mechanism providing for “sharing economy”. For this reason, our State authorities are very confused in exercising their managing authority in this matter. More importantly, they do not retain any clear legal instrument to protect the workers’ interests when needed.
The workers are always on the weak side in the working relationship. The workers in “sharing economy” are even more vulnerable since they have to invest a lot in the working tools to be able to cooperate with the technology firms, even by way of borrowing. The Vietnamese law respects the parties’ agreement and goodwill in participate in transactions. However, it should not be interpreted that a dangerous liberalization of unequal business concepts that in the long run may negatively affect the interests of our workers are allowed as well. It is worth noting that, the technology firms, with “sharing economy”, are being given great edges in the market game and product prices, but are only seeking to put the burden on the workers. The issue of ensuring a fair competition environment and equal interests should also be taken into consideration. Thereby, the workers may have more choices in finding a suitable partner.
In Vietnam, the 2019 Labour Code has introduced many new provisions that can contribute to removing the boundary between the cooperation/service relationships between individuals and businesses and the labour relationships. In other countries, some foreign courts and State authorities have identified the technology firms providing the connection platform as employers in the working relationships. From that basis, we expect to see more specific and clearer guidance from Vietnamese lawmakers on “sharing economy”, especially in the context that the important legal documents on investment and enterprises in Vietnam including the 2020 Law on Enterprises and the 2020 Law on Investment will officially take effect from January 2021.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.