Interview by Fergal Byrne
Airbnb has transformed the travel industry in just a few years. Its unique platform makes it easy for individuals to rent their property to travelers around the world. We recently interviewed Beth Adair, Global Tax Director at Airbnb, about tax initiatives aimed at increasing acceptance of the company’s new business model. Here’s what she shared with us.
Tax Insights: What role does innovation play at Airbnb?
Beth Adair: Innovation is very important to Airbnb.
For a start, our basic business model is incredibly innovative.
Home sharing has been around for many decades, but we are doing it in an innovative, internet-enabled way.
We also have an innovative vision: we’re not just looking to help people to find places to stay; we want them to feel like locals wherever they travel.
“Facilitating tax collection is one of the steps toward being a good partner to cities and the hosts all over the world.“
Beth Adair, Global Tax Director at Airbnb
We want to take down barriers between peoples and cultures and bring the world together.
So innovation is important to us at the most strategic level and also in the way that we execute everything.
Innovation can lead to new questions relating to tax. Airbnb recently began helping its users deal with tax issues that arise from renting out their homes on Airbnb. What is the background to this initiative?
We have a philosophy of supporting our community and are always looking for ways of helping them.
We realized that the tax responsibilities from renting out a property can be quite onerous.
There are many different taxes that impact hosts, and we have had to think through the appropriate role for us to play as a platform.
These are taxes that in the vast majority of cases are not our legal obligation to collect; it’s the responsibility of our hosts.
But we wanted to see how we could help hosts be tax-compliant.
We did do a lot of thinking and strategic analysis about this issue:
- How would we do it?
- Would we be able to execute effectively?
- Would jurisdictions be receptive to this?
- How would our hosts react?
In the end, we decided that helping our hosts was the right thing to do.
The biggest reason is we felt this was another way we could support our hosts, and we were in a unique position to provide this support.
So how do you help your hosts when it comes to income taxes?
With respect to income taxes, we decided we wanted to play more of a supporting role.
We try to educate our hosts about their obligations.
We provide reminder emails around tax time and give them summarized information about all their activity on the platform.
In some countries like the United States, we have a business partnership with H&R Block to make sure that they’re knowledgeable about how Airbnb works and what a host’s tax issues might be.
We want to provide education and support on the income tax side.
And what support do you provide for tourist taxes? This must be the first time that many of your hosts have to deal with this tax.
We decided to take a more direct role with tourist taxes.
They have many different names: hotel taxes, tourist taxes, occupancy taxes.
These are taxes that need to be paid on every transaction.
As every transaction runs through our platform, we realized we could definitely help with tax collection.
As we collect the funds for the transaction between the guest and the host, we’re in a position to actually collect these taxes for the host and remit them to the relevant tax jurisdiction and take that administrative burden off of our hosts.
How extensive is Airbnb’s tax support?
We started in our very first jurisdiction just over two years ago, and we are continuing to expand.
We’re currently collecting taxes in about 200 jurisdictions around the world out of the thousands of jurisdictions with tourist taxes in which we operate.
So we’re still at a relatively early stage but definitely picking up scale.
It’s a fairly major undertaking: in the US alone there are probably 3,600 separately administered taxes.
What is your vision for the future in terms of tax support for your hosts?
We continue to look at how we might support other taxes.
For each tax, we continue to ask ourselves:
- What is the right type of support?
- Is it education?
- Is it direct involvement?
The same kinds of questions we’ve considered with income and tourist taxes.
So far, we’re most active when it comes to income taxes and tourist taxes because they are the ones that are most important for our hosts.
We may become more involved in helping with other taxes in the future, but those are the ones that we see as being most important to support our hosts at this point.
What has been the feedback on this initiative?
Well, it’s not a topic that we tend to get a lot of contact around necessarily.
I would say to the extent that we have received feedback from hosts, they have been very positive and grateful.
Tax jurisdictions are also very appreciative.
A particular city or county might have hundreds or thousands of Airbnb hosts.
From a tax administration perspective, it’s much simpler to have one large taxpayer rather than relationships with hundreds or thousands of small taxpayers.
We have received good feedback from different tax jurisdictions: cities, counties, states, countries.
What are Airbnb’s plans for the future, and how can the tax function support the company’s vision?
I think that our focus as a company is truly about helping our guests feel like a local as they travel around the world and really experience the cultures that they’re visiting.
The way that I see tax supporting this is that we need to be accepted, and home sharing needs to be accepted, in all of these communities around the world.
Facilitating tax collection is one of the steps toward being a good partner to cities and the hosts all over the world.
This article is included in Tax Insights issue 17 – Transformation and innovation (pdf)