Digital Economy and Labour Taxation: International and Russian Policies on Taxing Freelancers

As the digital world is merging into the real world, more and more people of all ages and backgrounds are participating in the digital economy. Information technologies are steadily permeating all spheres of life entertainment, education, health care, security, trade, international relations. The rising popularity of remote work stimulates the free international movement of capital, which, in turn, should alert the states to the danger of revenue losses due to greater opportunities for tax fraud and tax evasion. If employers and freelancers reside in different countries, employers are likely to dodge employment taxes and evade paying social security contributions. To counter these risks and prevent financial crimes, tax authorities have embraced a wide range of digital tools, which can, for example, better inform taxpayers (employers and freelancers) about the main aspects of taxation such as the persons responsible for paying labour taxes, tax rates, tax base, tax period, tax exemptions and tax penalties. This study analyses international experience in the sphere of labour taxation in regard with digital economy and special tax regime for self-employed workers or the 'professional income tax', which has recently been introduced in Russia (still at its pilot stage). The relevant policies of China, France, Ireland and Finland in labour taxation are described and valuable insights into taxation of freelance income are garnered. The analysis of the strengths and weaknesses of the special tax regime in Russia demonstrates that it can provide an effective way to reduce the shadow economy and legalize the income of self-employed citizens.