Enter Details

Comment on stories, receive email newsletters & alerts.

This is your permanent identity for Business Insider Australia
Your email must be valid for account activation
Minimum of 8 standard keyboard characters


Email newsletters but will contain a brief summary of our top stories and news alerts.

Forgotten Password

Enter Details

Back to log in

Why Uber's GST fight is just the beginning

The up-ending of the taxi industry over the past couple of years by Uber and other services like it has been an unquestionable win for Australian consumers.

Car fleets are cleaner, faster to arrive, and easier to book. Depending on when and how you book, prices are also cheaper.

Cabcharge, which long had a hated monopoly in the processing of taxi payments, has been forced to let other in-taxi payment terminals process its cards, cutting out the outrageous “processing fee” of 10% of the fare to a more sensible 1 or 2 per cent. There’s something intensely satisfying in the chastening of a monopoly that was gouging consumers for as long as you can remember.

Regulators have been caught flat-footed by the speed of the changes to the industry and are now trying to catch up. As of Friday the Australian Taxation Office has put Uber X drivers on notice that they will need to collect and pass on GST to the government.

Uber has signalled its intention to take this to the federal court, because it feels it has been singled out unfairly against to “truck drivers, bike messengers, Airbnb hosts or any other participant of the sharing economy”. The company says it is disappointed the ATO “has tried to deny these people the same tax treatment as other individuals, who are only required to register for goods and services tax (GST) once they reach a turnover of more than $75,000 a year”. Here’s Uber:

Instead, they are suggesting that Uber’s driver-partners must register and remit this tax from the first dollar earned.

So on Friday we filed an application with the Federal Court to challenge the ATO’s position, which we believe clearly and unfairly targets Uber’s driver-partners. In our view, the ATO’s guidance should not have been issued when a federal tax review is underway and as the ATO has agreed that this is “an uncertain point of the law”.

To be very clear, we believe all our driver-partners should pay their appropriate share of tax and meet their tax obligations. However, we feel they have been unjustly singled out by the ATO for different tax treatment than truck drivers, bike messengers, Airbnb hosts or any other participant of the sharing economy.

Over fifty jurisdictions around the world have recognised ridesharing as a new model requiring updated regulations that reflect its unique attributes. The guidance by the ATO has tried to fit a new technology model from today into a 1990’s regulatory framework that was written long before this technology ever existed. Common sense would tell you that isn’t going to work.

You have to have some sympathy for Uber here – it is a big target, and the ATO’s decision to go after its members only does make you wonder why the ATO doesn’t just change the rules for everyone at the same time. But Uber is missing a chance to show some leadership, and championing the role of disruptive companies that are transforming developed economies around the world.

First, almost all the cost here is on the consumer. Drivers merely need to keep records and pass the money on to the government. Surely Uber can provide a seamless solution for this with all the boatloads of money getting dumped on its door by investors.

Second, while there are important social debates about whether GST should apply to health services, education and fresh foods, taxi rides are a pretty cut-and-dried case. Nobody is super-enthusiastic about paying more taxes but the absence of boundless outrage at NSW Premier Mike Baird’s proposal for an increase in the rate of GST shows that Australians have a grudging acceptance of the role of GST in the economy.

But there is also a broader issue here for Uber and companies like it. Just because a service is run from an app on a mobile phone at the consumer end doesn’t automatically provide some kind of free pass on taxation. And just as the government plans to apply GST to content we download through the so-called “Netflix tax” on books, music, and streamed content services from overseas providers, the ATO will surely be lining up other digital platforms like Airbnb and Airtasker in the GST crosshairs.

In any case, the registration of even part-time workers for taxation purposes and the tracking of digital transactions is a welcome development. As James White, capital markets economist at Colonial First State has argued, services are difficult to track in terms of their contribution to the economy even though they make up the vast majority of economic activity in developed countries. The digitisation of increasing numbers of transactions will not only help address this but should put downward pressure on the black economy.

Over time, Uber and companies like it can, through their digital platforms, contribute to building up a better picture of the role services play in the economy.

In case you missed it, it emerged over the weekend that Uber is now raising money at a $50 billion valuation. This is not a nuggety little start-up any more.

Large disruptive multinationals have enough problems being perceived as not paying their fair share of taxes in Australia and other countries without the giants of the so-called sharing economy picking fights with the government at every turn. You can see why Uber is taking on the ATO here, but this will not be the last time regulators come after a category that has been disrupted by some guys who had a great idea for an app.

Follow Business Insider Australia on Facebook, Twitter, and LinkedIn