Sadiq Khan, who I have known since we were on the same school governing body many years ago, has said he will have Uber's licence removed in London in three weeks time. This may not happen of course: there is an appeals process. I think it should.
I should say I have never used Uber, on principle. If I need a cab in London there are black ones. Or better still, buses. And trains. But that's not my point. My objection is to the fact the Uber does not charge VAT by seeking to exploit the gig economy.
I do not believe anyone who uses Uber contracts with their driver. They book and pay through Uber. I think the driver works for Uber. But Uber says they are the agent of the driver who, they claim, contracts with the passenger..
This matter for VAT. I won't go through all the ramifications. Jolyon Maugham, who has made this an issue, and I discussed it some time ago. He has pursued it, and all credit to him for doing so. The difference between the two contractual positions is that if Uber supplies the service then VAT is charged on the fare. If the driver does, as Uber claims, then the driver charges VAT only if registered. No one can, I suggest, make enough as a Uber driver to require registration. The result is that VAT is almost invariably not paid. And that, in my opinion, is a deliberate market distortions by claiming contracts are not as they appear to the end customer in a way intended to arbitrage the tax system to secure a deliberate competitive advantage the company should not enjoy.
This issue has not been resolved in tax law as yet: it is my suggestion that a wise government would consider legislation on the issue. In the meantime the attitude that it reveals about Uber's approach to regulation suggests to me that it is not an appropriate organisation to hold a private hire licence in London, not least when, as a matter of fact, it claims it does not provide private hire at all, but its drivers do.
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I noticed that Jolyon is looking for someone to front the VAT case for him, as if he should lose he’ll be on the hook for costs. If there’s someone out there with no assets, he’s looking for your help to front the case for him. (I’m not sure how that works, but he’s the lawyer soap y guess you’ll be fine!)
I notice you prefer Hackney carriages, buses and trains. Under what circumstances does the passenger pay VAT when travelling by any of those methods?
Taxis are theoretically taxable
Some are
The rest are public transport services. They enjoy their VAT status for good reason
The average person living in London simply cannot afford a black cab. And if you’re trying to get home after a late night out, you can forget looking for a bus or train in many parts of London – there won’t be one.
So your night out can be afforded with tax and employment abuse?
Is that reasonable?
I do not think so
I am a big fan of uber in practice. As a system it works brilliantly for the consumer.
You know who the driver is that is coming to pick you up. And you know exactly what you will pay.
What I don’t like is that they pay their drivers a pittance and the situation you have described above regarding tax.
Uber could pay their drivers a fair wage and pay tax and still be very profitable, I’m sure. It’s just greed, or lack of effective regulation, that means they are not doing so.
In any case, now that Uber have shown that the technology works, it would be a good idea for taxi drivers to form a rival model on a cooperative basis.
I got sick of getting ripped off by private hire drivers, and this sort of system gives total transparency over pricing. It’s undoubtedly the future from a system point of view, but we must ensure that system is not massively to the detriment of workers, or tax collected.
A coop would be great….
The New Economics Foundation are calling for just that: Khan’s Cars, they call it
http://neweconomics.org/2017/09/new-economics-foundation-calls-khans-cars-mutually-owned-alternative-uber/?utm_medium=email&utm_source=nefoundation&utm_content=2+-+Read+more&utm_campaign=this-week-22-sep&source=this-week-22-sep
“Taxiapp is completely owned by London black cab drivers. It allows passengers to book and pay like they would through Uber,” https://www.thenews.coop/122467/sector/community/taxiapp-londons-black-cab-co-op-alternative-uber/
Benz0 – ‘It works brilliantly for the consumer’ – But is it not the case that it is, in significant part, bcause it pays its drivers so poorly that it is able to work so brilliantly? You say it could pay decently and still make a profit, but I read that it makes enormous losses and that its key strategy is to develop driverless cars so that there are no drivers to pay and it can then make enormous profits. And an increasing number of people believe that driverless cars (beloved oof all tech companies who are intent on taking over our lives) will be a social disaster and will increase not reduce traffic and congestion – it actually seems obvious when you think what could be done (and what the incentives will be) with cars when commercial enterprises do not have to bear the cost of a driver in them and private individuals do not have to spare the time to drive themselves. Send the car out to get the pizza? the shopping? take something down to granny? There’s something that might need taxing.
ITV say Uber’s VAT avoidance is a sort of off-shoring.
http://www.itv.com/news/london/2017-09-22/20-things-you-didnt-know-about-uber/
“Uber’s tax arrangements are highly contested. Uber processes its jobs through its Dutch subsidiary, Uber BV, which allows Uber to charge a lower VAT rate. The Dutch VAT rate is 0 per cent for entrepreneurs conducting foreign businesses from the Netherlands; in the UK it’s 20 per cent. This allows Uber to offer super-low prices.”
Equally despicable, and an equally good reason to boycott Uber.
As I said, it did not go into it all…..
Addison Lee and other minicab firms have the same VAT approach – should they lose their licence too?
In my opinion, yes, if that is the case
The chicanery that Uber uses to define itself is enough to convince me of the same thing.
Looking at one of their senior team on TV last night summed up to me what is going on – the company has put the utility of the service to the user before any other consideration – even corporate responsibility.
It’s a narrow minded hyper-individualised service for an increasingly hyper-individualised society as can be seen by the apparent 400,000 people who have gone on line to support them.
The sort of thinking evident reeks of this emergent class of people who a very mobile and make very little connection with the real world because they avoid tax etc.
“the apparent 400,000 people who have gone on line to support them”
I’m betting that’s 400,000 mugs who will be ignored because everyone knows that they’ve responded like trained monkeys to the rallying call and misinformation text (e-mail?) that they would have received from Uber via the app.
I think that’s harsh
But I do sense co-ordination
Probably not as harsh as you may think. When AirBnB were threatened by a housing affordability activist campaign in San Francisco they spent $8million lobbying and drumming-up support.
http://www.huffingtonpost.com/entry/airbnb-san-francisco-proposition-f_us_56366676e4b0c66bae5cc3b6
Here we go. FYI:
“On Friday 22 September, many Londoners who regularly use Uber received an email. “As you may have heard,” it began, “the Mayor and Transport for London have announced that they will not be renewing Uber’s licence to operate in our city when it expires on 30 September.”
“We are sure Londoners will be as astounded as we are by this decision,” the email continued, with a sense of disbelief. It then pointed readers towards an online petition against this attempt to “ban the app from the capital.”
https://www.londonreconnections.com/2017/understanding-uber-not-app/?WPACRandom=1506399354950
I didn’t know about this when I wrote my original comment but some people are SO predictable.
There also now social media rumours and allegations emerging that some of the signatures on Uber’s self-promoted petition were faked:
https://mobile.twitter.com/msjaneaustin/status/911880680497451008
“Sadiq Khan, …, has said he will have Uber’s licence removed in London in three weeks time”
No he hasn’t, and it is slander to say so. Sadiq Khan is the Executive, the Executive is not allowed to make regulatory decisions, the Regulator (Transport for London) has terminated Uber’s licence (said termination suspended while they appeal).
Of course……
Are there any tech companies that are decent employers?
I ran one once that was as I recall
Does Uber pay VAT on their commission – which obviously exceeds the £83k threshold for VAT?
Yes
If Uber were to be really smart, they would accede to paying a greater amount in taxes, give the current drivers more of the fare, accept the plaudits for doing so and play the longer game. I’m sure their wealthy backers can take the additional hit for a few more years. No doubt they’ll instead go the litigation route instead as you’d expect from a big US tech firm of their type.
The longer game, of course, leverages Uber’s technology and brand name alongside the driverless car technology which is closer than you might think. The Uber drivers earning a pittance now won’t be earning anything in a few years as Uber-owned and branded driverless cars make sure all the fare heads to the company.
Not sure how they’ll dodge the taxman then, but I’m sure they’ve got it all planned out.
All if which shows the need to keep rethinking tax
A lot of people like to pretend that the ‘gig economy’ is so modern. Which it is if you consider early Victorian, Georgian or Regency work practices to be modern.
Excellent question
Uber is objectionable as a parasite business. It has made huge loses for the whole of its existence and the losses it makes are uses to subsidise fares when service is introduced into local markets. The Effect is to centralise a longstanding well-functioning marketplace into a huge tech monopoly. Uber not paying VAT is the least of the damage which it does to the livelihoods of cab drivers.
The argument that the service is convenient for the end user whilst on the face of it is true, ignores the fact that a very simple idea is used to monopolise a market place and deny the opportunity for self employment or small businesses from competing, This is by design and not chance I would argue. The Funders of UBER know exactly what they are doing.
This article and the comments from Zero Hedge are a good read.
http://www.zerohedge.com/news/2017-06-25/ubers-theranos-moment
Uber has also been banned in Sweden in some aspects of its model.
.http://www.reuters.com/article/us-sweden-taxicommission/sweden-proposes-ban-on-ride-sharing-services-that-make-profits-idUSKBN13Q3YD
Some of the UBER Numbers. Unter would be a better name.
http://www.zerohedge.com/news/2017-08-23/uber-burned-600-million-q2-key-results
Uber is an exploitative business model this meme appeared in my news stream yesterday it seems quite apt.
https://www.pinterest.se/pin/4433299610614823/
http://www.independent.co.uk/news/business/comment/hamish-mcrae/facebook-airbnb-uber-and-the-unstoppable-rise-of-the-content-non-generators-10227207.html
This phenomenon is I think a sort of tech age Enclosure of the commons with Monopolistic FInance Capital seeking to prevent any small business competition or self employment , no gleaning allowed in the Global FInancialised Economy and god forbid any self-provisioning.
Excellent post, Richard. The TFL decision and explanation takes up one sheet of A4 (and is generously spaced), so there is no excuse for anyone not to have read it buit many of those frothing at thne mouth over it appear not to have done so – the reasoning is very clear. I posted about this on my London transport themed website yesterday: http://www.londontu.be/the-uber-decision/.
Hello, useful piece, Richard. Can I drop a link here please for Robert Barwick’s article — Uber-parasite? Robert is a director of the Citizens Electoral Council in Australia (CECAUST). The Council is traditional Old Labour, and registered a political party down under.
http://cecaust.com.au/aas/Vol18No49/20161207-AAS-Vol18No49-Uber.pdf
It’s well worth noting that Uber doesn’t market itself to the world as a “taxi drivers’ booking agent”.
It markets itself directly to the end user, not the driver, as a taxi booking app. This implies that they are indeed making, or offering to make, a contract directly with the end user and not the taxi driver.
Therefore they should be liable to pay VAT on the fare, not the driver.
I guess Uber could claim two contracts exist. One between Uber and the end user for Uber providing a platform which enables the user to contact a driver, and a second between the driver and the end user, for the driver taking the end user where they want to go.
I doubt end users would make such a distinction. Most likely they see themselves buying an Uber ride, because that is the brand name on the service, and again implying the contract is with Uber, not the driver.
This is the distinction they do make
I do not think the consumer does make that distinction
It’s like thinking when you go into a supermarket to but, say, Weetabix, you buy direct from the manufacturer with the supermarket just acting as an agent. But we all know that is not true. It’s even moire not the case when we can’t identify the product itself one from another i.e. it’s not a branded product we buy but literally the next taxi that turns up, whichever that may be. With Weetabix we could say we know the original supplier. With Uber e don;t even chose that (if we were to use it, which I don’t)
There are a lot of interesting contributions from commenters in this post.
Following up this one from Roger G Lewis above: https://www.pinterest.se/pin/4433299610614823/
we find a graphic depicting this quote:
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening”
The quote is from one Tom Goodwin of Havas Media (whoever they are) and he attracted some interest in 2015 with this article:
https://techcrunch.com/2015/03/03/in-the-age-of-disintermediation-the-battle-is-all-for-the-customer-interface/
which claims that the smart companies are those that avoid content or production (where the costs and work are) and control the ‘digital customer interface’ where the money is.
If you think that seems to be a tad bit parasitic you are probably right. At the time, Robert Preston of Forbes also noted that investor enthusiasm for these firms is reminiscent of the “new economy” hype that preceded the dot com crash of 2001.
https://www.forbes.com/sites/oracle/2015/04/20/digital-disruption-its-not-what-you-think/#fa52f7e9e069
From what I can tell there is another problem in that these firms leave an unresolved vacuum of responsibility. Alibaba hosts counterfeit goods traders, feigns denial, then fails to control them. AirBnB disrupts neighbourhoods, distorts housing supply and and fails to regulate the rorters on its own books. Facebook shrugs as it hosts targeted fake news (politically motivated lies) and election interference en masse.
With that being the case it is worth noting that according to Reuters (hat tip. Roger):
http://www.reuters.com/article/us-sweden-taxicommission/sweden-proposes-ban-on-ride-sharing-services-that-make-profits-idUSKBN13Q3YD
“Uber is currently seeking to convince Europe’s top court that it is a digital service, not a transport company, in a case that could determine whether app-based startups should be exempt from strict laws meant for regular companies”
Well screw them. They are a transport company now whether like it or not and if they are going to skim the money they ought to take the responsibility that goes with it because no one else will. So I’m pleased to see Transport for London hold them to account and I hope that the European judges do the same.
P.S. To that end It may be worth mentioning that in the last few days Facebook has announced a 9-point plan to curb election interference. See what you think:
https://newsroom.fb.com/news/2017/09/providing-congress-with-ads-linked-to-internet-research-agency/
https://techcrunch.com/2017/09/21/election-interference/
@Marco Fante “A lot of people like to pretend that the ‘gig economy’ is so modern. Which it is if you consider early Victorian, Georgian or Regency work practices to be modern.”
Quite, there’s nothing new about it. And Uber will then combine it with the Woolworths technique of arriving in town and selling everything for a penny and when most of the competition has been driven out, hike the price. Like Amazon with unlimited capital to spend they can hang on till others drop out to create their monopoly. if they can avoid tax as well then the capital lasts even longer.
There is at least one Uber driver that thinks the decision is correct
http://www.huffingtonpost.co.uk/dennis-bartholomew/uber-driver-tfl-license_b_18070056.html?
The additional trouble for us all is that because minicab legislation is not fit for purpose Uber could quite easily obtain a licence in another more lax local authority area and still be available in London. I believe they have already been spotted as available in both Brighton and Leeds despite having no local licences.
My threepenn’worth was here
http://www.progressivepulse.org/society/uber-too-big-to-hail/
@Peter May,
Generally, I couldn’t agree more. As regards this observation:
“Uber will then combine it with the Woolworths technique of arriving in town and selling everything for a penny and when most of the competition has been driven out, hike the price. Like Amazon with unlimited capital to spend they can hang on till others drop out to create their monopoly.”
You raise what has become an interesting point of discussion. To begin with there is a name for this (as you may already be aware) its called Predatory Pricing and “predatory pricing in the UK is illegal. It is prohibited under EU Competition Law to sell goods at a loss with purpose of forcing other firms out of business”.
https://www.economicshelp.org/blog/glossary/predatory-pricing/
It is also illegal in most parts of the Western World. So that is one for the Uber watchers to keep a close eye on as events unfold. As hard as it is for me to remain objective on this subject I nonetheless harbour doubts as to how it is that that Uber could actually establish a monopoly.
I don’t see why others such as Lyft could not compete against them globally or why many others could not compete against them at a local or national level. I mean all that they are offering is an app to hire a mini cab – how hard is that? Not very I would imagine, certainly not in the long-run.
To that end, business reports indicate that they are spending themselves broke (on what I’m not sure) trying to establish a global network that supposedly creates economies of scale (?) – but there are no economies of scale in linking a local driver to a local passenger. There is no supply chain. The costs and logistics are mostly location-specific and could just as easily be done on a smaller scale.
So if Uber’s backers are pouring stupid levels of cash into this no-profit entity in the hope that predatory pricing will win them a monopoly in the long-run, then they may well find themselves in the company of MySpace, Alta Vista, Theranos and the other high profile digital extinctions. While on that topic I noticed that Roger G Lewis (above) linked us to an interesting post here:
http://www.zerohedge.com/news/2017-06-25/ubers-theranos-moment
It’s all like Deliveroo
And so 1999
The outcome of which we know
“This is an ideological decision made for reasons of Socialist dogma. The disruption that Uber has brought to London has had two main effects;
1. Shaking up a previously fat and happy taxi industry.
2. Excellent price and service outcomes for the consumer.
Sadiq Khan and the UK extreme left wing cannot reconcile 1) with 2). They are wracked with anger and jealously that an innovative idea has resulted in a heavily-unionised industry experiencing change and the parent company owners becoming rich.
The outcomes for the consumer are a very distant 2nd place to this envy in their list of priorities.”
http://www.williamofockham.com/2017/09/23/ideology-uber-alles/
With the greatest of respect, not reporting crime, not doing agreed employee checks, not following regulation, using software inappropriately (not on the TfL list), not paying VAT appropriately aren’t ‘socialist dogma’; they’re about the rule of law, which I thought the right was keen on? Or is it that the law is only upheld if it does not impede private gain?
I’ve just stopped laughing. I can’t take anyone seriously who thinks Sadiq Khan is extreme left wing.
Let’s deal with the tax issue last;
Approved software? Really? TfL is a software certification organisation? Is that a good use of our taxes? As a consumer and taxpayer, I’d be happy to let the quality of their software be judged in the marketplace of consumers.
Reporting crime and employee checks – yep, and there should be a sliding scale of consequences for the company until they get it right.
Not following regulation? That’s tautological as it refers to the above.
VAT? There’s a pretty well-established process to go through with those lovely folks at HMRC so why does TfL need to get involved?
As I say, it sounds like they came up with the answer (ban them) and worked backwards from there, no sliding scale of appropriate penalties.
By the way, when we say “not paying VAT”; who, precisely, pays VAT? You know, the owner of the actual wallet it comes out of?
You contempt for the rule of law is staggering
Facts also appear somewhat alien to you
I wouldn’t try again
Oh, I get it; you don’t answer questions you don’t like and delete comments that point out your foolishness.
Another lefty in an echo chamber.
Silly arrogant fool.
And you wonder why you are deleted?
I suggest you go and play elsewhere
…..said the contemptuous ignoramus who can’t even engage with the facts of the argument. It’s great knowing that I won’t have to read such tripe again; thanks Richard.
My pleasure
It looks like Uber need to get better quality people on their payroll. The well-connected Tory hacks that they used to get themselves licensed in the first place have dumped them:
http://www.dailymail.co.uk/news/article-4351418/Cameron-aide-s-uber-cover-up.html
https://www.theguardian.com/technology/2017/apr/12/ubers-head-of-communications-quits-scandal-hit-cab-app
and now they are left with the likes of ‘William of Ockham’, not the sort of guy you need when when good PR is required. Its only a matter of time before his karma runs over his ‘dogma’ (and not a moment too soon).
I suggest we might be missing the real point about what MAGAF (the five horsemen of the app-ocalypse) and their fellow travellers are up to here. It’s not really about the money, it’s about control; total, absolute, unrestricted control of everyone and everything.
Yes their tax strategy is handy in providing the capital resources they use to crush all competition underfoot but its real point is not to make money but to deprive democratically elected governments of the money they need to manage a civilised society. Governments are not necessarily a bad thing as long as they realise that their role is to administer society and anaesthetise the population into acquiescing to whatever MAGAF feed them. But it is completely unacceptable for these governments to start getting ideas above their station. They must be denied any resources that might cause them to imagine they have any power.
The UK government seems obsessed with the notion of “taking back control”. If they are, it’s MAGAF they need to have issues with, not the EU. It might be a vipers’ nest of neo-liberal dogma but at least the EU had the guts to stand up “A” (and the Member State government that helped it avoid/evade taxes the length and breadth of Europe and beyond) and “G” (whose monopolistic distortion of searches crushes completion). What does the UK government do, other than lie back and think of whatever it thinks about?
I have no idea what you are talking about
Google “MAGAF” and you get the “Mexican American Grocers Association Foundation”.
I’m not entirely sure but I don’t think that is the entity that George (above) is referring to.
MAGAF, the five most valuable corporations in the world. M does software, A makes gadgets and overworks the letter “i”, G tells you what you’re looking for, A does the internet-age equivalent of mail order and F kids kids into thinking they have friends. The fellow travellers are the rest of the smug, self-righteous, $300 tee-shirt wearing, faux-philanthropic pacific coast brigade. Please don’t tell me you think they’re bent on anything other than global domination.
That’s new on me….
I do wonder how many of the anti-Uber brigade live, work or socialise in London.
The key to Uber’s success is that they offer something that we, people who live work and socialise in London, want.
We are not some weird stateless app-driven bunch of aliens, we are the ordinary citizens of the city, many of whom put Corbyn in such a strong position in GE2017.
TFL are an unaccountable body who take a very high-handed attitude to everything they do.
Black cabs are expensive, rarely seen outside Zone 1, and compared to Uber drivers the drivers are often rude. That trade group has consistently resisted change of any form, and where it has made grudging movement (cards, apps) it has been under competitive pressure.
So start with the people, and what we want and need as we go about pinning up the UK GDP.
Then build a service that meets your other requirements.
TfL is unaccountable?
How?
It has a duty to protect London transport in its broadest sense, and that is exactly what it is doing