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With historical roots in the once-common practices of lodging and boarding, short-term rentals (STRs) have become in recent years a prominent feature of the global travel accommodation space. Worth roughly US$40 billion in 2010, the global value of the STR market reached US$115 billion in 2019. Despite a significant hit on business as a result of the COVID-19 pandemic, the STR market is showing strong signs of rebounding. The increased popularity and accessibility of the STR market can be largely attributed to the emergence of digital sharing economy platforms, such as Airbnb and Vrbo, which play the role of mediator in simplifying interactions and transactions between hosts and guests from around the world. As this platform-facilitated STR market has grown, home sharing has garnered increasing attention. Many have celebrated such innovation in the hospitality sector for the benefits it has delivered, among them lower prices, increased consumer choice, local economic development, community revitalisation, and a reliable income stream for property owners. However, others have been quick to decry the practice, accusing STR platforms of engaging in anti-competitive behaviour, exacerbating issues of over-tourism and a lack of affordable housing, and undermining the habitability of communities. Of notable concern among many STR skeptics is a potential shift in practice away from individual hosts renting a primary residence or space therein, and towards commercialization, whereby corporate entities are buying up what were once residential properties to list in the more lucrative STR market. The above picture of costs and benefits points to a market that is rife with tensions. Naturally, this reality has produced calls for regulation and government involvement, and in some cases, has even fuelled campaigns for all-out ban of the practice. As governments have stepped into the regulatory fold, however, they have faced significant challenges. This is because STR activity, different in composition and dynamics from that which plays out in traditional markets, pushes conventional policy boundaries, undermining in some cases the effectiveness of standard legal, regulatory, planning, and governance processes. Regulatory struggles can be attributed to three key factors. First, most conceptions of home sharing employed in the regulatory space treat the STR market as conventional and thus two-sided; that is, as encompassing interactions between those supplying the service (hosts) and those accessing it (guests). Such understandings fail to capture the involvement of additional players—digital STR platforms, most notably, but more recently professional property managers as well— not to mention the nature, extent, and implications of their involvement. Importantly, STR platforms are more than passive facilitators of market activity, and not only influence the contours and dynamics of the market, but also actively shape the regulatory space. Second, attempts to regulate home sharing have been hampered by the widespread tendency, within both policy and academic circles, to treat the market as a monolith. Yet, an assessment of drivers of participation and dynamics among guests, hosts, and platforms makes manifest the complexity of the STR market and the diversity of activity that plays out within it. Notably, STR hosting spans a spectrum of activity, from low- or no-fee home sharing in the spirit of collaborative consumption, to renting a suite in a primary residence, to the commercial multi-hosting referenced above. Drivers of guest participation in the market are similarly diverse. Far from passive, platform involvement is shaped by the desire to create and benefit from network effects, and thus spans partnership development, bridging to distinct but related markets, and even the pursuit of socially minded or philanthropic endeavours. The above diversity suggests that one-size-fits-all approaches to management are destined to fail. Third, governments and policymakers have relied on traditional regulatory concepts and parlance, such as the notion of regulatory violation, to characterize various forms of STR market activity. However, in the case of platform-mediated home sharing, the concept of regulatory fractures—instances in which new modes of activity do not map well onto existing frameworks, thus disrupting regulatory effectiveness—is more apt. The conceptual frame of regulatory fractures enables one to uncover the tensions and complications that are produced when novel activity arises within the context of longstanding institutions and processes, and underscores the extent to which reimagined regulatory and policy approaches, tailored to the unique features of the STR market, are vital. Further, if not addressed, regulatory fractures will not only undercut the intent and effectiveness of regulation but will also curtail the potential benefits of home sharing activity. Going forward, successful management of the STR market will hinge on the ability of policymakers to confront the factors currently hindering the effectiveness of policy and regulatory approaches, namely an under-developed understanding of the STR market and its dynamics, and a continued use of tools ill-suited to novel economic activity. Fortunately, governments ready to innovate in the regulatory space and reimagine management strategies will learn that a number of less conventional approaches show promise. Among such emerging approaches is co-regulation, a tactic employed with success throughout the European Union in particular. Given their prominent role in the market, as well as their desire to influence regulation to maintain network dominance, platforms could make willing and effective partners in co-regulation, just as some other industries are entrusted with a degree of self-regulation. Though it would require the development of a robust framework to ensure effectiveness, co-regulation could help governments to overcome existing issues, such as those related to compliance and enforcement, while also enabling access to more comprehensive data, without which tailored policy and regulatory solutions are significantly hampered. [ABSTRACT FROM AUTHOR]

Innovation is a major driver of economic progress and a seemingly perpetual struggle for Canada. Supply-side innovation policies like research funding, tax credits and R&D subsidies have not delivered the expected results. Canadian governments should consider increasing their use of demand-side policies such as public procurement to support innovation. Public procurement is the purchase of goods, services and works by government institutions and state-owned enterprises. For government, the focus in public procurement is often on cost minimization and risk avoidance. This approach comes with significant downsides. For example, insistence on low prices can squeeze small and medium-sized enterprises (SMEs) out of the bidding process. SMEs vastly outnumber larger firms in Canada and, given opportunities to innovate, they could provide a significant boost to employment and economic output. Public procurement of innovation could stimulate local demand, further policy goals, turn society's needs into market demands, help manufacturers achieve critical mass for production and lower production costs and ultimately help innovative firms grow and spread their novel solutions to more users. Risk aversion is one of the biggest barriers to innovation procurement. Publicsector buyers may be reluctant to buy novel solutions when the payoff takes too long or if they risk being blamed for careless spending. However, risks can be reduced through insurance, providing immunity to buyers for potential losses, third-party standards, or pocurement intermediation. Another major barrier to procuring innovation is the increased cost. Buying new products is incompatible with short-term cost minimization. Governments and public institutions need to broaden their cost-benefit analyses to include lifetime costs and benefits and account for the extra benefits generated by innovation. To encourage public organization to assume the price premium associated with novel solutions, particularly from SMEs, governments should consider setting up grants or other special funds for innovation procurement. This financial support does not necessarily require additional government spending. Governments at all levels can start by identifying existing programs in support of innovation, investment, economic diversification, or SMEs that are underperforming and redeploy some of these funds toward innovation procurement. Public procurement of innovation is a complex process that requires additional training for public servants so they can assess opportunities and accurately communicate buyers' needs and requirements. Corruption is a possible threat with open-ended specifications meant to encourage innovation. Free trade agreements may include provisions limiting public bodies' ability to offer preferential treatment to domestic suppliers. The European Union adopted three new directives in 2014 to support innovation in public procurement. They allow life-cycle costing to be considered when contracts are awarded, encourage authorities to break up contracts into lots so SMEs can participate and encourage preliminary market consultations between buyers and sellers. Canada has been slower to adopt similar changes. The Jenkins panel, convened in 2010 to review federal programs' effectiveness in supporting R&D, found that Canada is over-reliant on supply-side innovation instruments as opposed to demand-side ones. Successive federal governments have begun to re-consider the innovation policy mix with the Build in Canada Innovation Program, Innovative Solutions Canada and Canada's Innovation and Skills Plan. However there is more potential to change the system at the subnational level. Provincial and municipal governments are responsible for the bulk of the country's public procurement, more than in any other OECD country. Provincial and local authorities are also in a better position to recognize concrete challenges in their constituencies, articulate them as needs and search for solutions. The province of British Columbia has been taking steps in this direction with a procurement strategy meant to support innovation. Some municipalities are also starting programs to support start-ups through challenge-based procurement. As these initiatives are still in the early stages, it makes sense for Canada to start small. Innovation procurement should focus on SMEs as the risks involved are smaller. Public organizations should identify needs and challenges that existing goods and services cannot meet, and where possible seek solutions with many small contracts instead of fewer, larger contracts. They should be open about those needs with the public and potential suppliers and choose the most suitable procurement model. Governments at every level should include innovation as a mandate in the procurement process and make the necessary reforms to embrace it. Ultimately, procurement reform to support innovation demands champions at the highest levels of policy-making circles and it also requires public belief that this is an effective approach to foster innovation and economic growth. [ABSTRACT FROM AUTHOR]

Canada could be about to lose its tax competitive advantage it currently enjoys in attracting investment to its oil sector: its low corporate tax and royalty rates compared to the U.S. While we will start to know better the details of a U.S. tax reform package in the next month or so, two reform plans provide a basis to analyze potential impacts: the tax-reform "Blueprint" put forward last year by the Republican-controlled House of Representatives, and President Donald Trump's own reform proposals. Either one, or even a hybrid version of the two, would make tax and royalty effective tax rates on new investment in the U.S. oil industry significantly more attractive to investors. Combined with the lack of any plans for a U.S. carbon tax and the lightening U.S. regulatory environment, investing in American oil might soon look more compelling than investing in Canadian oil. And when the price of oil eventually rises again, the attractiveness of Canada to international investors will diminish even more. As an investment destination, Canada's popularity has already been fading. One key index, measuring foreign-direct-investment confidence, shows the U.S. at the top, while Canada has slid from third place to fifth place, behind even Britain, despite so much Brexit uncertainty. Amid Canada's rising tax burden and its growing regulatory load, however, oil-producing provinces have nevertheless managed to retain a competitive advantage against oil-producing U.S. states in attracting international capital. That is primarily due to a lower corporate tax rate in Canada, as well as competitive royalty regimes and, in most oil-producing provinces, the absence of a retail sales tax on capital equipment. Alberta, for example, which currently offers the lowest marginal effective tax and royalty rate (METRR) on conventional oil investments of all the Canadian provinces based on a $50 per barrel West Texas Intermediate price, also offers a lower METRR than nearly all comparable U.S. states measured (except Pennsylvania). But if the Republicans succeed in passing a version of their tax-reform proposals -- and as a major campaign promise, they are facing great pressure to do so -- Alberta will slide quickly from one of the best North American destinations for oil investments to somewhere in the middle of the pack, and Saskatchewan will become one of the highesttaxed oil-producing jurisdictions. Should rising oil prices trigger higher royalty rates in both provinces, they will become even less competitive. Even though the House plan proposes a less drastic cut to corporate income tax rates, it will actually do more than the president's proposed tax reforms to eliminate Canada's competitive edge and put the two countries METRRs virtually on par, due to the immediate deduction of capital expenditures. While the prospect of the two countries ending up with roughly equal METRRs might sound less than worrisome, if it happens, Canada will lose the most significant advantages it has over the U.S. in attracting investment to its oil sector. The U.S. already enjoys the advantage of being a much larger market, and having a faster-growing economy, which is why it ranks as the most-preferred destination for foreign investment intentions. Investors also enjoy more regulatory certainty in the U.S., where the sector is being aggressively deregulated (as opposed to in Canada, where new and sometimes unexpected twists in the regulatory environment are becoming more common). And the U.S. still has no plans to implement a national carbon tax, while in Canada carbon taxes are expected to escalate over the next few years. With all these challenges to overcome, Canada's oil industry enjoyed one key edge to attract business - its lower tax burden, which soon it might lose as well. [ABSTRACT FROM AUTHOR]

The discovery in 2012 of a significant natural gas reservoir in the Romanian offshore sector of the Black Sea, followed by other encouraging findings, offers an opportunity for the Romanian government to update the fiscal legislation concerning taxation and royalties for oil and gas activities in order to attract more investment in this vital sector. This study analyses the opportunity of replacing the current revenue-based royalties that apply to all types of oil and gas projects with a resource-rent tax (RRT) in the offshore sector. A RRT is the most efficient way for the government to collect a share of the rents or surplus generated by the exploitation of non-renewable resources. However it can be difficult to implement a RRT for small extraction projects that are hard to monitor. We recommend that the new legislation distinguish between conventional onshore and offshore projects, primarily because offshore production entails larger investment expenditures, higher risks, and longer times to build and then to recover costs, than conventional onshore projects. A resource rent tax (RRT) should be adopted for offshore oil and gas projects because it could provide greater incentives to invest in exploration and development than royalties based on revenues from oil and gas production. Under a resource rent tax, a firm can deduct all of its operating and capital expenditures from its current revenues from a project. If the operating and capital expenditures exceed current revenues, which will generally be the case in first few years of a project, the firm can carry these expenditures forward at a specified interest rate and deduct them from future revenues. The base for a resource rent tax is the difference between the present value of the revenue stream from a project and the present value of its operating and capital expenditures or, in other words, the present value of the economic rent generated by the project. The average effective tax and royalty rate (AETRR) is the share of the economic rent generated by a project that is captured by the government through taxes and royalties. The marginal effective tax and royalty rate (METRR) measures in percentage terms the wedge that the tax and royalty system drives between the gross-of-tax rate of return earned by a marginal investment and the net-of-tax rate of return. The METRR is a measure of the disincentives to invest in oil and gas projects that are created by the tax and royalty system. We estimate that replacing the current 13 per cent royalty with a 45 per cent RRT would maintain the current AETRR and reduce the METRR for exploration and development activities in the Romania offshore sector by more than 12 percentage points, from approximately 18 percent to less than six per cent, resulting in a significant reduction in the distortions created by the tax and royalty system. This switch would generate approximately the same, or perhaps even more, revenue for the Romanian government, as our analysis of a prototype offshore natural gas project illustrates. If it adopts a RRT for the offshore projects, the Romanian government should consider the adoption of a RRT rate that varies with the price of oil or the price of natural gas. The variable RRT rate means that, as the price of the resource increases and more economic rent is generated, the government is able to capture a larger share of a larger pie. Having an explicit formula for how the RRT rate will vary with the price of the resource also reduces uncertainty about future RRT rates if prices are different in the future. In order to smooth its revenue stream from offshore projects and to improve public acceptance of the adoption of a resource rent tax, the Romanian governments could retain a royalty on revenues from offshore production in the initial years of a project, which would be credited against the project's future RRT liabilities. This would change the time profile of the government's revenue stream, relative to a pure RRT, but the present value of the revenue stream would remain the same. Another complimentary fiscal instrument that can be used to achieve a similar goal as the RRT is to award exploration rights through competitive auctions. The more geological information is available to potential investors, the closer their bids will reflect the expected rent from developing the resource, allowing the government to capture without distortions a significant portion of the rents generated by oil and gas extraction projects. [ABSTRACT FROM AUTHOR]