Last week the Australian Tax Office announced that UberX, a type of taxi service, will be treated as a business and its drivers will need to collect GST.
This decision is welcomed by the Council of Small Business of Australia.
COSBOA members know the digital age is bringing new exciting ways of doing things. The consumer should benefit from these changes and often business will benefit too (sometimes not). Society should also benefit, unless tax income drops or there is unfairness in the way business and consumers are treated.
When these technology-led changes occur – as exciting as they are – the one thing we demand is that existing businesses are not treated differently from the new form of business. The case of Uber is a good example of that policy challenge.
So is UberX a taxi service?
The ATO has obviously put the Uber business model through some type of assessment process. The ATO would have asked: Is this a business? How do they make money? Are there customers involved? And other similar questions.
UberX drivers supply taxi services to Uber customers in return for financial reward, therefore they need to collect GST and pay tax on income the same as anyone else. The mainstream taxi industry has been through many changes over the past 40 years, including a crackdown by the ATO on cash payments to drivers, the development of a range of industry benchmarks and regular reviews of the sector.
The challenge of Uber is the latest change and the industry will deal with it as needed, but will Uber and the current taxi industry have different rules?
The taxi industry has developed a whole range of rules and practices that have been demanded by the consumer and by government.
- driver codes of conduct;
- fatigue management codes;
- a taxi industry board in some jurisdictions; and
- taxi licences for those that want to earn money driving a cab.
Safety for drivers and the general public has been a key feature of these changes as well as transparency for the tax system.
Applying consistent standards and regulations
That safety demand is the big issue. Uber drivers are not specially licensed; they don’t have to have a special test at the motor registry; they do not have to renew a taxi driver licence or obtain an endorsement every year or every few years.
As the Uber website states: “To be an Uber driver you need to be at least 21 years old, with a personal licence and personal auto insurance with any mid-size or full-size 4-door vehicle, in excellent condition.”
Who checks that the vehicle is in excellent condition? What if the brakes are dodgy? What if it is a stolen vehicle?
Interestingly some jurisdictions demand language training for taxi drivers. Uber doesn’t. When I got a taxi driver’s licence in 1976 I had to do a special test where I had to show that, if the brakes failed, I could stop the car quickly using gears and a handbrake. That was in 1976, so I imagine the requirements on drivers have increased not decreased. Does Uber make sure their drivers can stop quickly in an emergency?
The other changes that Uber’s entry into the industry will create are also interesting.
Currently, at most airports in Australia, taxis have to go through a special entry area where the airport owner can charge them for the privilege of using the airport as a pick-up point. How will they get money if it is Uber? Will the taxi rank at airports go quiet and the public pick-up area be overwhelmed by unidentifiable Uber cars?
A taxi rank is a place that we know to go when we need transport. Will these also disappear?
If Uber is going to be here to stay, all governments need to start thinking now about how consumers using its services will have their interests and safety protected.
A level playing field without excessive red tape
In a highly regulated country like Australia the last thing the community needs or wants are new regulations for every new service variation emerging out of the sharing economy. In essence, UberX services are just a type of taxi service and so the same rules that apply to taxi drivers should apply to UberX drivers. It’s about all competitors playing on a level field.
So well done to the ATO for keeping it simple and applying the same rule to all, and let’s make sure that fairness in business is maintained not just for taxis but for all businesses, otherwise we will all suffer.
Peter Strong is the chief executive of COSBOA.