By WIKI SU
Uber drivers are gearing up to contest a Tax Office ruling that they must be registered to pay GST from August 1.
On a blog post on its website, popular ride-share company Uber said the tax decision was flawed and unfairly penalised drivers.
"These are 9000 individuals who will now be caught up in red tape before they even accept their first ride, and will then be hit with a tax on their very first dollar earned, unlike like truck drivers, painters, online sellers, gardeners, other sharing economy participants, and every other small business who do not have to collect GST until their business reaches $75,000pa," Uber spokesperson Katie wrote.
"The typical uberX partner in Australia works for around 20 hours a week and takes home around $30,000pa – well under the Government’s threshold for GST," she wrote.
A Tax Office ruling on "the sharing economy" said that from August 1, all ride-sourcing services would be classified as taxi travel and taxed accordingly.
The decision comes amid increasing anger from taxi drivers about the dent Uber is making in the Melbourne taxi market.
“Uber is just destroying the taxi industry,” Melbourne-based taxi driver Raja Ahmed said in a Channel 9 News interview.
“What are we gonna do? The job is already taken,” another Melbourne-based taxi driver, Fiseha Gebremariam, said.
As the cars don’t need to undergo taxi licensing, Uber can provide a cheaper transport alternative to taxis.
The Uber app allows people to choose their driver and pay with an e-payment before even getting in the car. A rating system allows customers to give and view feedback on individual drivers, which can also provide an added sense of security.
Since it started in Melbourne early in 2013, Uber has gained in popularity. Reports suggest most people are happy with the Uber service.
Monash University student James Whitfort said he saw a big difference between his recent experiences with Uber and taxis.
“The first time I used Uber, it was Good Friday and the dude gave me a chocolate egg. The next time I caught a cab, the dude cut someone off then flipped them off,” he said.
And usual Friday and Saturday busy times for taxis seems to be disappearing as more people choose Uber.
Professional Drivers’ Association spokesman Doug Clark said there was some middle ground for taxis and Uber, but not without consequences.
“Taxis and UberX can co-exist but that will probably mean that taxis will lose business and the taxi industry may shrink,” Mr Clark said.
Analysis from the personal finance app Pocketbook, found that for every $12 spent on taxis in Australia, $1 is spent on Uber, with its market share increasing by seven times since January 2014.
As competition increases, unhappy taxi drivers are finding the profession harder.
Mr Clark said some taxi drivers were breaking the law by driving their own car rather than their taxi on Friday and Saturday nights in a bid to make more money.
“This is moonlighting – holding a secret second job at night – and illegal as their private cars are not registered to take commercial passengers,” Mr Clark said.
Wrong business model
According to Mr Clark, the business model for taxis is inefficient.
Mr Clarke said taxi passengers paid too much and the drivers were paid too little because most of the money went to the license holders and taxi operators rather than the drivers.
About 89 per cent of taxi licence holders do not operate their licences but instead rent them to taxi operators, while most taxi operators do not drive taxis either, rather they employ taxi drivers to drive them.
But after taxi operators pay the rental fees to the license holders, little is left to pay drivers.
“The annual licence rents were close to $40,000 in Melbourne but this has fallen to about $24,800 in March 2015. All of this rent is charged through taxi passengers and it accounts for about 15 per cent of every taxi fare,” Mr Clark said
Mr Clark also said that taxis must work around the clock to make enough money to pay for the license holders, taxi operators and the drivers resulting in each taxi needing three drivers.
Mr Clarke said he believed it could be much simpler.
“All you need to provide great taxi services is passengers, an accredited vehicle, accredited driver who actually drives and a dispatch system to allocate the jobs. This is all that is required in a fundamental and efficient business model.”
According to Victorian Taxi Commission statistics, there were fewer active taxi drivers in March – 15,867 in total – the first time the figure has dropped below 16,000 since June 2014.
Meanwhile, the State Government took the step of increasing the number of taxi licences last June in a move to increase competition in the industry.
Taxi Services Commission spokesperson Jamie Collin, said the organisation welcomed competition in the taxi and hire car industry in Victoria, but was concerned for public safety as the unregistered Ubers were e not monitored by any regulatory body.
Uber’s legal controversy
Currently Uber operates two services in Melbourne – Uber Black and UberX.
Uber Black employs accredited drivers and licensed vehicles and complies with regulations.
However UberX generally uses unaccredited drivers and unlicensed vehicles and this presents a safety risk for passengers, according to the VTC. Dozens of UberX drivers in Victoria have been fined $1700 each for illegally carrying passengers.
Victoria Taxi Association spokesperson Georgia Nicholls said it was time the Government stepped in to regulate Uber and other ride-share companies.
“It is the job of governments and regulators to determine what minimum standards the community expects and which need to be in place in order to protect passengers, the public and service providers themselves,” Ms Nicholls said.
“They need to work on a series of regulations for Uber on driver screening and testing, insurance, vehicle checks and WorkCover policies to ensure that businesses can compete on a level playing field.”
Government’s reaction
According to the Taxi Services Commission (TSC), Uber has agreed to comply with driver accreditation laws following enforcement action by the TSC since late 2014.
On April 27, Victorian Transport Minister Jacinta Allan held the first Taxi and Hire Car Industry Ministerial Forum to address the problem of Uber on the taxi industry.
No detailed conclusions were released, but the committee will establish a sub-committee to handle ride-sharing services in Victoria. The sub-committee will be formed before the next ministerial forum to be held on July 27.
Future for the taxi Industry
Despite Uber cutting into the Melbourne taxi market, taxis still remain an in-demand service.
“The taxi industry has provided a vital service to the Victorian public for many decades and will continue to do so in the future,” Ms Nicholls said.
Melbourne taxis drive an average 100,000 trips every day day in Melbourne city, with the number continuing to grow.
The VTA does not see any significant impact on the rate of taxi trips since the emergence of illegal ride sharing services.
According to research by the VTA, fewer than 6 per cent of Victorians have used an Uber service, including both UberX and Uber Black.