Trade union on Bolt: Tax system not tenable in long-term

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Bolt Food couriers.
Bolt Food couriers. Source: Anna Aurelia Minev/ERR

The Confederation of Estonian Trade Unions (Ametiühingute keskliit) sees no quick solution to Bolt's tax scheme issue, which it deems unacceptable, since Bolt's way of working is already fully operational and running at the moment. At the same time, the model has less long-term viability, the union says.

Daily Postimees reported last week that one of Estonia's highest profile companies, Bolt, does not consider its food couriers to be independent contractors, but rather service providers, which allows the company not to take of taxes from its employees' earnings, as well as to not provide them with social benefits or guarantees - in comparison with its main competitor, Wolt, which follows a more traditional business model and deducts income tax.

Jaan-Hendrik Toomel, head of communications at the Confederation of Estonian Trade Unions, says the organization has spoken with Bolt couriers and discovered that many of them approve of the scheme. "They realize they can earn more money this way than if all taxes were deducted," he told ERR.

However, Toomel said, there are also some couriers who disagree. In the big picture, the formation of a tax-free zone confuses competition.

"If some market participants should pay the tax and others don't, the obvious competitive advantage goes to those who do not pay the tax," Toomel said. "This ultimately reduces prices, but at the expense of something else. The state loses tax revenue, and individuals lose pensions."

Toomel said that there are two categories of drivers: those who do it as their primary occupation and work as many hours as possible: "And then there are those who only do it as a side gig in addition to other employment which provides social security," he explained.

"Those who work less are the least interested. Their health insurance is up and running and their pension is covered from another source. They just want to make as much money as possible," said Toomel. "Clearly, the circumstances are different for people who do this as their primary job. In this case, there is then a very strong relationship between issues of social guarantees, competition, and taxation."

Toomel also said that the EU is working on a platform work directive: "According to which, people working through digital labor platforms are granted the legal employment status as contract staff by default (emphasis in original ERR Estonian article - ed.), unless the platform itself indicates differently." He said that the confederation supported the proposition.

Bolt began as a sharing economy and has become a major enterprise, but he new EU directive could render its business model untenable, Toomel said.

"It's not acceptable if the entire company model is predicated on tax evasion," said Toomel. "Are we protecting individuals or the commercial interests of self-employed individuals? If the service is not viable, because it is based on tax evasion then it might be that this model is just not viable."

Toomel said that a quick resolution to the Bolt tax conundrum is unlikely. Creating a unique tax structure for couriers with a primary job is one possible fix, but this takes time, he said.

Last week, the Ministry of Finance issued a statement in support of Bolt, on the grounds that companies following more novel approaches allow a test-bed for newer business models to develop which may be more efficient than many of the older ones.

Bolt is one of around a dozen "unicorn" firms which are Estonian-founded, meaning they have a market value of at least a billion U.S. dollars.

Jaagup Jalakas, the head of Bolt Food Estonia, said the company complies with the law in all countries and pays taxes accurately.

"We are one of the largest taxpayers in Estonia, and we do not shirk our responsibilities. Naturally, we want legal certainty, so our tax team and the tax authorities agreed to analyze this issue in detail."

Jalakas said that because Bolt is an Information Society service, the couriers who use their platform are independent service providers and are not employed by Bolt.

This article was updated to include the statement from Jaagup Jalakas.


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Editor: Kristina Kersa, Andrew Whyte

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