Creating a common framework could hinder further innovation in the sharing economy
In today’s fast-changing world, regulation often seems to be at cross-purposes with innovation. While smartphones and the app ecosystem have allowed us to extract greater economic value—with the sharing economy putting to use hitherto unutilised capacity and generating employment along the way—these disruptions have also created a kerfuffle amongst governments looking to regulate them through laws that the very disruptions have rendered obsolete.
Cab-hailing app Uber has been asked to register as a taxi-service, while online rental service Airbnb has been asked to follow the same regulations that hotels must abide by. But now mayor of 10 cities, including New York, Paris and Athens, have come together to create a common framework for these sharing economy apps to operate across cities.
Although the mayors claim that the laws will provide consistency for tourists, governments and companies, a ‘one size fits all’ approach may not work as each city or country has its own set of problems. For instance, India is trying to put a ceiling on the rates charged by a Uber or an Ola while some states are trying to place a price-floor to create a level-playing field for the autorickshaws and the regular taxi operators which charge much higher rates at times.
With the changing technological landscape, the government will also have to change norms or create new rules to benefit from the sharing economy. For example, Airbnb has been collecting a tourist tax and had paid $1.3 million in taxes to Paris in the last quarter of 2015 and has also signed an agreement with Florence and Lisbon to collect such taxes. As for the standardisation of rules, countries are better off with ones that foster innovation, not disrupt it.