If this week’s Panama Papers revelations have shown anything, it is that rich people will go to great lengths to hide their wealth from tax collectors.
For sharing economy companies like Airbnb, which last raised $100 million at a $25.5 billion valuation, it’s a little more complicated. Airbnb’s strategy on taxes is to pay them, or at least help the homeowners who make use of the service to pay them. The startup wants to legitimize itself with local municipalities, partly as a way to fend off future battles that can get drawn out. At the same time, the company is also shielding some of its corporate profits from tax liabilities through a complicated web of subsidiaries, according to a Bloomberg News story.
Understanding how Airbnb is framing the debate on how taxes should be applied, both locally and federally, is not only important to the startup but to other sharing economy sharing biggies and hotel industry rivals.
In a statement provided to Re/code, Airbnb said that “hosts keep and pay taxes on 97 percent of the price they charge for their listing,” and that the company pays “all of the tax that is due in all of the places that we do business and when we make long term business decisions, we act in the best interest of our community.” The statement doesn’t fully address the findings in the Bloomberg article, which looks at corporate taxes and how Airbnb has shifted some money into tax shelters.
For the home-sharing behemoth, taxes are a big deal, especially the local occupancy taxes it wants collect and then remit to city governments. Right now, little is as important to Airbnb as getting laws passed that will technically “legalize” the service and allow it to remit those tax payments. Airbnb has already paid out more than $40 million in tax remittances, including in places where agreements are not in place, according to figures provided by the company. The broader goal of all this is to further normalize its relationships with government, and strengthen its position against hotels, activists and skeptical lawmakers.
Outside of heavy opposition in places like New York City, the company has largely succeeded in convincing governments to pass legislation recognizing its service; it now has such agreements signed with more than 160 cities worldwide.
Today, the home-sharing service is continuing its legalization push by taking a public swipe at the American Hotel & Lodging Association, the trade organization that represents hotels in Washington. In a strongly worded letter sent to the AHLA, Airbnb accuses the organization of playing both sides, supporting “legalization” agreements in public while covertly working to oppose them.
Referring to an AHLA memo that outlined opposition strategies to such policies, Airbnb global policy chief Chris Lehane writes that Airbnb was “pleased [to learn that] the AHLA has changed its position and is no longer fighting to prevent the Airbnb community from paying taxes.”
AHLA disagrees. “Our position has always been that all lodging businesses should play by the same rules, and taxes are just one part of that,” said Vanessa Sinders, AHLA Senior Vice President of Government Affairs, in a statement. “The commercial operators that Airbnb and other short-term rental platforms facilitate ought to play by the same rules as the tens of thousands of lodging properties. … In contrast to Airbnb, these properties do not pick and choose which laws to follow or when to pay taxes and especially how much to pay.”
Last November, Airbnb won its ugliest fight yet, defeating San Francisco’s Proposition F ballot initiative that would have more tightly regulated the home-sharing service.
On the day after the vote, Lehane, an ex-Clinton administration adviser, described a political organizing effort that aimed to use Airbnb hosts and customers as foot soldiers in markets where it faced opposition, which was what it did to beat back Proposition F. Shortly thereafter, Lehane and Airbnb released a “Community Compact,” a document in which the company promised to pay its “fair share” of taxes.