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The world as we know it is rapidly changing. One of the main drivers of this change is the digital transformation. Nowadays people can opt to stay at an alternative accommodation provided via the online platform Air bed and breakfast (hereinafter: Airbnb), instead of making a reservation at a hotel. Technology has changed the way we live, and it seems like there is no going back to a simpler time. The digital transformation contributes to improved efficiency, reach, and customer satisfaction. Airbnb was valued in 2008, their start-up year, with a seed grant of $20,000 , but as of 2017 Airbnb was reported to be worth $31 billion. Despite its continuous growth and increased revenue, the Airbnb platform doesn’t fall inside the scope of most tax legislations and regulations around the world which may create an unfair level playing field concerning the traditional hotel sector and a loss of tax revenue to states. Currently, one of the most discussed issues among tax authorities, policy makers, and academics around the globe is the subject of taxing the digitalized part of a business, especially when this creates substantial value without any physical presence in a state.
In Aruba all established hotels are subject to taxes such as the tourist, environmental, and corporate income taxes. Even though Airbnb is generating revenue in Aruba it is not subject to the taxes because the existing Aruban legislation does not cover online platforms either. As such, hotel business with physical presence have a disadvantage compared to online accommodation business as they are taxed while the online ones are not. As Airbnb is becoming a worldwide force to consider Aruba Tourism Authority (hereinafter: ATA) pursued a memorandum of understanding (hereinafter: MOU) with Airbnb. The intention was to create a legal framework which allows both parties to address the issues of taxes, the host accommodation standards, and regulations and to guarantee that all is in line with Aruba tourism’s policy. This MOU will expire in November of 2018, if not renewed.
Considering the abovementioned, it is important to discuss the similarities and differences between the hotel industry and the online platform Airbnb, to hereinafter discuss the possibilities to impose taxes on online platforms. The scope of this thesis will be restricted to Airbnb listed accommodations only since people erroneously label all that is ‘alternative accommodation’ as Airbnb. A comparative analysis would therefore bring insight for future dealings. Taking the abovementioned into account, this thesis will address the following main research question:

“Taxation of the digital economy: To what extent can Aruba subject the digital platform Airbnb to tourist, environmental, and corporate income taxes?”

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This thesis is structured as follows. In chapter 2 the focus will be on analysing the characteristics of the digital economy focusing on the studies conducted by the European Union (hereinafter: EU) and the Organisation for Economic Co-Operation and Development (hereinafter: OECD). Also, after having analysed the characteristics and challenges of the digital economy a general definition of the digital economy will be provided. In chapter 3, the focus will be on the hotel industry and its main characteristics. In addition, hotel taxation in Aruba will also be discussed specifically with regards to the tourist, environmental, and the corporate income tax. In chapter 4 the sharing economy principle on which the Airbnb platform is based on and how the online platform functions will be analysed. A current state of affairs regarding taxes between Airbnb and Aruba will also be touched upon. In chapter 5 a comparative analysis between the Airbnb platform and the hotel industry will be provided. (discussed ). Chapter 6 will conclude the thesis with a summary of the main aspects and ultimately answer the main research question.

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