21/09/2015 5:46 AM AEST | Updated 15/07/2016 12:51 PM AEST

Hands Off The Sharing Economy

It's time for government to get its hands off Australian innovation, and encourage disruption, not punish and deter. Until that happens, our economy and country are set for decades of slow growth that none of us can afford.

The nanny state is alive and well and it's not just locking you out of your favourite late night watering hole. It's also stifling new business models.

As a legislator, my most important task when approaching any area of public policy is to ask myself, 'what is the proper role of Government?'

When it comes to the sharing economy -- a new and different form of opportunity and wealth creation -- the simple answer is 'nothing'. Government should get out of the way.

Both sides of politics are generating a lot of hot air about their 'struggle' to understand the right policy settings for the sharing economy. These debates demonstrate a lack of understanding at the political level about how to encourage job growth and wealth creation.

While technology is driving much of the sharing economy, its new markets and business models would not be so popular if existing services were not so wound up in red tape.

Consumers are clamouring for new services like Uber, Lyft, and Airbnb because the state has stuck its beak into traditional transport and accommodation services, trying to right wrongs that don't exist, distorting market forces and delivering mediocre outcomes that consumers do not find acceptable.

We are punishing people who seek to invest and create jobs because politicians think they can somehow make markets work better.

The latest example of this overreach is the decision by the Australian Taxation Office to treat Uber drivers differently from other contractors or small business operators.

In Australia, if you run a small business and don't bring in $75,000 per year in revenue, you don't have to register for GST even when you are not paid directly by the customer. Making microbusinesses pay GST would run counter to a basic principle of tax administration -- it generates little revenue compared to the costs imposed on the microbusinesses and the ATO.

However, the ATO has decided that this sensible arrangement should not be allowed to stand in the case of Uber drivers. Uber has had the gall to provide 15,000 Australians with an opportunity to earn an income when it suits them.

Rather than recognising a new a different model requiring fresh ways of thinking, the ATO - in the words of the Deputy Commissioner James O'Halloran - decided to 'level the playing field'. It has told Uber that its drivers must pay GST from the first dollar they earn.

The ATO is motivated by a desire to help taxi drivers in those States and Territories where regulations ramp up the cost of taxi trips, and because taxi operators pay GST from their first dollar. The ATO considers Uber to be equivalent to a 'taxi travel' provider, and not like truck drivers, bike couriers, food delivery drivers and Airbnb hosts, who don't have to collect GST until they reach $75,000 per year in turnover, and who are often paid in exactly the same way as Uber drivers.

For some reason, Uber drivers are different.

And yet, unlike a taxi, it's not possible to hail an Uber, and there is no 'grey economy' danger, something that has long troubled the taxi industry. Nobody can pay an Uber driver in cash.

For those who think treating taxi drivers and Uber drivers differently mounts to inequality of treatment, the solution is not to treat Uber drivers differently from other microbusinesses, but to ask whether taxi drivers are being treated unfairly. The underlying problem is the government's addiction to taxes and regulation.

Uber has stood its ground and is pursuing the matter through the courts, but this raises a serious issue. Not everyone is Uber, the world's most highly capitalised start-up. Uber has the funds to take the fight to the roadblocks and regulators when they get in the way.

If Uber -- with its global presence and investor backing -- has to fight tooth and nail to survive against a backdrop of regulatory interference, what chance do home-grown entrepreneurs have? Allowing public sector agencies and regulators to stifle the growth of new business models will kill any chance Australia has of lifting itself out of its current economic malaise.

It's time for government to get its hands off Australian innovation, and encourage disruption, not punish and deter. Until that happens, our economy and country are set for decades of slow growth that none of us can afford.


David Leyonhjelm is Liberal Democrats Senator for NSW. He is on Twitter @davidleyonhjelm and his website is

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