The government of British Columbia recently announced that it has entered into an agreement with Airbnb which will see Airbnb collecting 8% provincial sales tax and up to 3% in municipal and regional taxes from its British Columbia hosts and remitting the taxes to the government.
It is estimated that an additional $16 million in provincial sales tax revenue will be remitted to the B.C. government and an estimated $5 million will be collected for municipal and regional governments. The B.C. government has indicated that the additional taxes it collects will be spent on measures to create affordable housing. Details are expected to be set out in the upcoming provincial budget.
The rapid growth of Airbnb and other short-term rental platforms has generated considerable controversy globally. Hotels claimed that these short-term rental operations created an unlevel playing field, as guests were not required to pay tax on their rental accommodation, as they would in a hotel.
Initially, many levels of government worldwide considered trying to ban short-term rental platforms such as Airbnb. However, by entering into this agreement, the B.C. government has acknowledged that the sharing economy is here to stay and that regulating short-term rentals makes more sense than trying to ban them outright.
While this agreement creates more tax fairness, it does not address one of the major criticisms about short-term rental platforms: that they are removing too many housing units from the long-term rental housing supply, resulting in extremely low vacancy rates.