Tax witch-hunt in the collaborative economy confirmed

19 January, 2018

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Rosa Guirado

Back in July 2017, we wrote a post warning that the collaborative economy tax regulation bill appeared to be a witch-hunt more than a proposal to avoid tax fraud in assigning the use of homes for tourist purposes.

In it we mentioned the text of the bill and the main juridical shortcomings apparent.

Now, however, after Royal Decree 1070/2017, approved by the Council of Ministers held on 29th December 2017, published in the Official State Gazette on 30th December 2017, we are able to confirm that the witch-hunt has been consolidated.

Completely free, but without juridical consequences.

As the Royal Decree not only breaches the Directives of the European Commission, the Electronic Commerce Directive and the data protection laws, but also as, due to the obligations to provide information it imposes on what it calls “collaborative platforms”, it also obliges these to breach the liability (exemption) regime of the Electronic Commerce Directive and the data protection laws.

An absolute juridical absurdity, committed with absolute “premeditation” (that does little, rather nothing, notwithstanding an exceptional case, to charge the original bill, in spite of the warnings of illegality provided) and “distraction techniques” (the metaphor being understood due to it having been approved by the last Council of Ministers of 2017, just before the Christmas holidays), and that could have even been mistaken for a joke, had it been approved just one day earlier (as 28th December is ‘April Fools’ Day’ in Spain).

Why do we say Royal Decree 1070/2017 is illegal?

Because the European Commission already foresaw in its Communication of 2nd June 2016 on “A European Agenda for the Collaborative Economy” that the member States should establish parameters for exchange of information on tax obligations (which is not what the platforms oppose).

However, at the time the European Commission foresaw such an exchange of information on tax obligations, it also set the essential two requisites to which the Member States to were to adhere.

And the Finance Ministry Regulations fully ignore that double requisite set by the European Commission. It is as simple, and as serious, as that.

The two requisites – which are fairly reasonable, one must say – established by Europe, when exchanging information on tax obligations by the Member States, are as follows:

(1) that the Member States guarantee fulfilment of the laws on personal data protection.

However, Spanish Royal Decree 1070/2017 ignores such personal data protection laws as it:

Does not require consent by people affected by the information requested.
Does not inform them of the purpose for which their personal data shall be used.
And all this is articulated through a regulation with a rank lower than that of law (a Royal Decree, by the Ministry of Finance and Public Function), when it is known that the Personal Data Protection Act foresees the duty of secrecy for platforms, a duty to which an exception may only be made by means of a Law (never by a Regulation).

2) and as a second requisite, Europe demands that the Member States comply with the liability regime for platforms foreseen in Directive 2000/31/EC on Information Society Services, that states that information exchange must be performed “without prejudice to the regime of liability of intermediaries foreseen in the Directive on electronic commerce”.

The fact is that the Directive foresees that online platforms (of whatever kind, whether collaborative or not) are NOT liable for the content they host on their servers, as long as their role is merely technological, automatic and passive, the Directive emphasising that the platforms do NOT have the obligation to check or monitor the content hosted on their pages.

Now the Government of Spain, through the Ministry of Finance and Public Function, has just published a Royal Decree that is contrary to such a clear principle, as it obliges the platforms to monitor and to concern themselves with the content hosted on their webs, in spite of this being waived by virtue of the Electronic Commerce Directive.

To sum up, after having been warned of its unlawfulness (through the allegations and opinions submitted and published), the Ministry of Finance has insisted on enacting the unlawful and – to make matters worse – force the platforms to also commit unlawful behaviour.

Why do we say that the Ministry of Finance Regulations encourage illegal conduct by the collaborative economy platforms?

Because it forces the platforms to:

Monitor the data on their webs and assess their content, breaching the liability waiver of the Electronic Commerce Directive
To communicate their users’ data, breaching the duty of secrecy imposed on them by the Personal Data Protection Act.
To provide data on their users without their consent and without informing them for what purposes it is to be used.
To communicate such data and breach the duty of secrecy, this being articulated through a Regulation with a lower rank than that of Law.
To provide disproportionate / unnecessary data in all cases, without regard for the principles of efficient regulation (need and proportionality according to the general need). In this case the general interest has not been established, nor is it given the necessary juridical importance on which to construe the principles of need and proportionality.

Special mention must also be given to the post by Sharing España (a group within the Spanish Digital Economy Association, Adigital) regarding the Royal Decree discussed.