Tax Administration Challenges for Gig Workers in the Digital Platform Economy: An Economic Analysis

Abstract

The rapid expansion of the digital platform economy has fundamentally disrupted traditional tax administration frameworks. This paper examines the tax compliance challenges confronting gig workers and platform enterprises in China’s digital economy, analysing the structural mechanisms through which information costs and incentive distortions undermine effective revenue collection. Drawing on information economics, principal-agent theory, and behavioural economics, we construct a tripartite analytical framework - “information costs → incentive distortions → institutional responses” - to diagnose the systemic dysfunction arising from information asymmetry among tax authorities, platform enterprises, and gig workers. The analysis reveals that platforms strategically withhold transaction data to minimise compliance burdens, while gig workers rationally underreport income given low audit probabilities and behavioural biases such as loss aversion and framing effects. Tax authorities, constrained by resource scarcity, contract their oversight to high-yield targets, producing a self-reinforcing low-compliance equilibrium. To break this institutional lock-in, the paper proposes four policy pathways: establishing a platform-centred data-sharing and co-governance mechanism with mandatory real-time income reporting; developing a gig-specific progressive tax framework with simplified filing procedures and industry-specific deductions; building an intelligent regulatory system integrated with the Golden Tax Phase IV platform; and cultivating a multi-party collaborative tax governance ecosystem. These recommendations aim to restore incentive compatibility across all actors and construct a sustainable tax governance architecture adapted to China’s rapidly evolving digital economy.