The unbearable lightness of crowdsourcing

Services like Airbnb and Uber show how the collaborative economy empowers consumers by disrupting legacy industries, but their success also presents a tax challenge for governments.

Sharing and crowdsourcing services are starting to take digital disruption to a whole new level and the implications for governments -- and society in general -- are enormous.

At the forefront right now are the accommodation platform, Airbnb, and the private taxi service, Uber, valued by the American venture capitalists throwing money at them at $US10bn and $US3.5bn respectively.

But there are many, many more, including several other rapidly growing transport and accommodation platforms (Lyft, Hail, Sidecar, Onefinestay, HomeAway) as well as others offering car hire, office space, money lending, venture capital and professional and personal services. Freelancer, the professional services marketplace, is valued at $500m on the Australian stock exchange.

READ MORE: Move over Freelancer, Elance-oDesk has landed

The existing statutory cartels, especially in transport, and the governments that license them, are starting to react.

The NSW government has said it will ban ride-sharing services like Uber, saying they breach the Passenger Transport Act, although Victoria seems to be OK with them. Over the weekend the Hillsborough County Transportation Commission in Florida started issuing $800 tickets to Uber drivers, having taken out full-page newspaper ads warning people not to use them.

In France, typically, the tension has been reaching new levels, with taxi drivers blocking access to airports and attacking Uber cars. In Brussels, Uber is now simply banned after a complaint from a big taxi company.

Governments have quickly become involved in the ride-sharing services because they license the taxi cartels and thereby artificially create significant value in the licences, which is now being threatened. But many other industries are being threatened -- especially hotels, by Airbnb.

In fact a whole new subculture is developing around what’s being called the “collaborative economy”.

Yesterday I spent some time with Peter Harris, the Australian managing director for a Canadian firm marketing called Vision Critical, which recently did a survey on the subject. They found there are now 80m “sharers” in the United States, 23m in the UK and 10m in Canada.

The users do it mainly for convenience and price, not some kind of desire for sustainable living; more than 90 per cent of them say they would recommend the service, and Vision Critical reckons the “sharing population” is likely to double in the next year.

The growth is viral because those who use one sharing service, say Airbnb, are likely to use another.

What’s happening is not particularly new or hard to understand. These services simply represent another wave of consequences from the collapse of barriers to entry and the transfer of power to consumers produced by the digital revolution.

The media business is trying to cope with a breakdown in pricing power for both advertising and subscriptions at the same time as a massive increase in output volume through multiple devices.

The music industry has been virtually ruined by the collapse in its pricing power, so that musicians are reduced to collecting pennies from Spotify and iTunes and trying to make a living from live events.

Industry after industry is falling to digital disruption and newly powerful consumers.

READ MORE: Uber's taxi offensive here to stay

The sharing economy is being described as a ‘movement’, and some people come over almost religious about it. But really, it’s just another way in which the lowering of barriers to entry is destroying the pricing power of legacy industries.

The re-use of existing assets like houses and cars, instead of building new hotels and new licensed taxis, reduces marginal cost to near zero.

And it’s a challenge for governments. Not just because licensing systems are under threat, but also because, as Google and Facebook have shown, paying tax is optional for these cloud-based operations.

Google, for example, paid tax last year in Australia of $7m ($466,802 after deductions) on revenue of $2bn because much of the revenue was transferred to Ireland.

All of the new global digital operators can do this because they exist nowhere and everywhere, and are able to choose their tax domicile and easily transfer profits through internal licensing arrangements.

Reducing the company tax rate from 30 to 28.5 per cent -- which the Australian government intends to do next week even though it can ill-afford to do so -- won’t help. The rate would have to be cut to tax haven levels to make any difference.

Can this deluge of disruption be stopped, or even delayed? Short answer: no. Long answer: definitely not.