
Canada seeks to end Uber's tax advantage over taxi companies - mpatobin
http://www.reuters.com/article/us-canada-budget-uber-idUSKBN16U00W
======
vkou
The fact that they weren't paying GST is mind-boggling. The purpose of the
exemption is to let someone running a tiny hobby business sell their products
without having to deal with tax headaches.

The purpose of the exemption was never to let a mega-corporation take the
exemption of each employee, multiply it by the number of employees, and
pretend that they don't need to pay tax.

What next? A grocery store taking the $30,000 exemption for each employee
working for it? A law firm taking a $30,000 exemption for each legal aide
working on a case?

~~~
thrill
Uber drivers are not employees. They are independent contractors. Uber, as
part of their service, collects money from riders, giving both the rider and
the driver a comfort factor as they don't have to deal with cash. As "hobby"
businesses they each individually were enjoying the exemption. Now they will
not - because we can't have "hobby" businesses causing discomfort to the well
connected.

~~~
peeters
If it quacks like a duck, it gets taxed like a duck. Uber has made a business
out of exploiting legal loopholes. They know it, their users know it, the
politicians know it. It's just been a race to close them. I have no sympathy
for Uber in this. They obviously provide a valuable service to people, so I'm
sure they'll survive. Now they'll just be competing on an even playing field.

~~~
briandear
There is no such thing as a loophole. The law is the law. Isn't every tax
deduction really just a loophole? It's every company's fiduciary duty to
minimize expenses using any legal means at their disposal. It's idiotic to
criticize a company for using the law to their advantage. There is nothing
stopping a competitor from doing the exact same thing. The law applies equally
to everyone. It isn't Uber's fault taxi companies have structured their
businesses the way they have.

~~~
peeters
Yep, the law is the law. Which is why the government is changing the law
instead of just complaining loudly.

------
chollida1
Uber's response.

[http://www.newswire.ca/news-releases/statement-from-uber-
can...](http://www.newswire.ca/news-releases/statement-from-uber-canada-on-
the-2017-federal-budget-616953004.html)

One interesting note about the press release to the Canadian newswire service,
it highlights that Uber was confounded by Canadian Garret Camp.

This is set to go live on July 1st so I guess you can watch the data from that
point on to see if it has any effect.

> The budget statement estimates the change will raise C$3 million in new
> revenue in the 2017 budget year, rising to C$5 million in the next few
> years.

So this isn't really about raising money as $3 million is figuratively a
rounding error.

~~~
CountSessine
_it highlights that Uber was confounded by Canadian Garret Camp_

s/confounded/co-founded/cg

Sorry for the nit-pick, but in this case the word _confounded_ had me
genuinely confused about what this special interest group, Canadian Garret
Camp, is (are they angel investors? some sort of VC incubator? a front-group
for taxi companies?), and why they were lobbying for removing Uber's GST
exemption.

~~~
slavik81
To state that more clearly, Garret Camp is a person. He is a Canadian
businessman and co-founded Uber along with Travis Kalanick.

------
jmcdiesel
All of this Uber/Lyft stuff has me wondering...

Instead of making it harder to be an Uber/Lyft to match Taxis, why not make it
easier to be a taxi? Driving someone around shouldn't be so complicated.

Regulation, when necessary, is good... but most of what I see around taxi
regulation is just money gouging on the part of the state.

~~~
chx
> Driving someone around shouldn't be so complicated.

Personal safety gets involved, big time, when driving someone around.

~~~
jmcdiesel
Does the safety somehow diminish when you pay for the ride?

If I give you a ride to work, for free --- then give you a ride to work, but
you pay me, what is the functional difference requiring more regulation on the
second part?

Is your safety affected any different? Aside from the basic protections built
in to any business when it comes to collecting money, etc, what extra rules
need to be in place.

From a purely pragmatic standpoint, what is different about the experience
that requires all the extra crap?

For example, in many cities where they were losing the legal fight, Uber
offered free rides... and were legally allowed to do so, because they weren't
charging the customer. Explain to me what was different in that scenario that
made it any safer for the passengers?

~~~
Broken_Hippo
_If I give you a ride to work, for free --- then give you a ride to work, but
you pay me, what is the functional difference requiring more regulation on the
second part? Is your safety affected any different? Aside from the basic
protections built in to any business when it comes to collecting money, etc,
what extra rules need to be in place._

In the first instance, both parties can refuse, and can drive in any way they
want. One-off rides (or paying for part of the gas in a carpool) aren't much
of a worry. This is basically as safe as driving yourself somewhere. Of
course, they could be a really bad driver with minimal insurance, so hopefully
nothing bad happens. In addition, in these situations, you are usually on a
friendly basis with the person - minimally a coworker.

Your safety is different when you start to ride with someone that does it for
a living. You don't know the person, so you are trusting they know what they
are doing and can drive in a way that is safe for you. The more folks drive,
the more likely they are to be in an accident (this is why insurance increases
with your commute). Minimally, they need to know how to combat this. I'd
prefer them to have a more comprehensive driving test, including things like
passenger safety and minimal regulations on driving record/background check.
Unlike your friend, I'm pretty sure a taxi service has to have adequate
insurance in case of an accident. Many places also have policies about pricing
because of shady pricing policies in the past.

~~~
jmcdiesel
While the more you drive would statistically make you more likely to get in an
accident, that still doesn't affect passenger safety. You can argue that the
more you drive, the safer you drive, as well. The more experience you have
driving, the more inbuilt habit/reaction you have as body memory.

The more you ride would be what affected passenger safety.

~~~
Broken_Hippo
"You can argue that the more you drive, the safer you drive, as well. THe more
experience you have driving, the more inbuilt habit/reaction you have as body
memory"

I used to think something similar, but the truth is that the problem with
professional driving isn't one of experience, but things like driver fatigue
[1]. All things being equal in driving skill, the "normal" driver generally
drives safer than the professional.

[1][https://www.transportation.gov/fastlane/why-we-care-about-
tr...](https://www.transportation.gov/fastlane/why-we-care-about-truck-driver-
fatigue)

~~~
jmcdiesel
In that document, it states over and over that the vast majority does not have
a problem and is responsible.

Laws will not weed out irresponsible people.

The key points here arent that there is a potential for danger. The point is
that the extra laws (which just so happen to come with a price and generate
revenue for the state) don't prevent those problems.

They could pass a law requiring that drivers drive less than 40 hours a week.
Does that really fix anything? Is there any way to determine that the driver
who drove 10 hours this week didnt do so after staying awake for 3 days
straight?

------
unit91
TL;DR:

The Canadian government realized it could increase​ taxes by appealing to
moral outrage, with terms lime "tax advantage" and "loophole". End the tax
advantage by lowering taxes and reducing the size of government? Out of the
question.

~~~
andruc
Reducing the size of the government's tax income does not reduce the size of
the government.

~~~
unit91
I didn't claim it does. Reducing the size of government decreases the amount
of money the government needs to operate without incurring additional debt. If
the government were less expensive to run, officials wouldn't need to invent
new ways of taking money from the people.

------
acveilleux
Using the small supplier exemption seems really doubtful to me. That pushes
the tax collection liability on the driver (who can't collect taxes, since
payment is through Uber app) and the limit for that is 30k$ so a lot of
drivers should probably have charged taxes since they may have earned more.

In addition, my understanding (not a tax/law person) is that the 30k$ would be
for the whole fare, not the driver's cut.

GST rate is 5%... But provincial sales tax could apply, at least in provinces
where there is HST (Harmonized Sales Tax, administered by fed gov, divided
with province.) HST varies from 13% to 15%. I wonder if we'll see provinces
going after the drivers for back taxes. Revenue Quebec is notoriously
aggressive in going after people for sales tax.

~~~
vkou
> That pushes the tax collection liability on the driver (who can't collect
> taxes, since payment is through Uber app) and the limit for that is 30k$ so
> a lot of drivers should probably have charged taxes since they may have
> earned more.

Sounds like Uber needs to update their app.

> I wonder if we'll see provinces going after the drivers for back taxes.

I'm sure Uber will do the responsible thing, stand by its drivers, and make
them whole in the case that they are billed for back-taxes.

~~~
bitJericho
Hahaha good one.

------
canistr
I like using Uber. But I also don't like the idea of money flowing out of the
country/province/city into Silicon Valley. I'd much rather that the money
earned by Uber stays within Canada in some form such as a tax or investment by
them into our region.

Particularly because Uber-like apps are becoming important to public
transportation infrastructure. Additionally, taxi revenue coming from tourism
remains in the hands of Canadian taxi companies as opposed to Uber resulting
in a net positive flow of money into the country.

~~~
flamedoge
We need a Canadian Taxi hailing app. We can make it.

~~~
tensor
You mean like this?

[http://www.itbusiness.ca/news/canadian-alternative-to-
uber-l...](http://www.itbusiness.ca/news/canadian-alternative-to-uber-launces-
with-backing-of-taxi-industry/62749)

Sadly it doesn't address any of the problems with cabs in Toronto.

1\. Cabs won't take credit cards by claiming "the machine is broken" when it's
not, presumably so that they can avoid reporting tips or fees, or they might
just skim your card.

2\. Cabs are too expensive.

3\. Cabs might not even take you if they figure the ride isn't worth it.

This app doesn't allow you to pay, so doesn't help 1. It actually make 2 worse
by charging you $2 just to "hail" a cab with it. I mean, seriously? And it
doesn't help with 3 either.

~~~
ghostly_s
You may be shocked to learn these exact problems exist with cab companies
everywhere in the US, too.

~~~
tensor
That's not too surprising. Though I will say that NYC cabs are pretty ok, at
least I never have to worry about being able to pay with a credit card and
they are actually cheaper than Toronto cabs, which really says something.

------
tn13
What I would have preferred is that Canada removing the burden off the taxi
companies and let them give competition to Uber in innovation space instead of
trying to bribe politicians to act as gatekeepers.

~~~
ghostly_s
Would you like to point to any precedents for 'unburdened' cab markets which
have resulted in better service?

~~~
aianus
Have you ever been to Bangkok? I can just pay $1, hop on the back of a moto
idling outside the skytrain station, and off we go lanesplitting through
traffic straight to my office 2km away.

It's amazing and would be so illegal on so many levels in Canada (where I
spend $1000/mo on transportation).

~~~
geoka9
Why not get a moto then which would pay for itself within a month or two?

~~~
aianus
I don't follow. It only cost $2 a day to take the moto taxi between the office
and the Skytrain. What kind of moto can you buy for $60-$120? And that's not
taking into consideration parking requirements and the extra time it takes to
drive all the way from home instead of doing most of the distance on the
Skytrain.

------
legulere
Slowly the price advantage that Uber has by using loopholes fades away.

~~~
objclxt
> Slowly the price advantage that Uber has by using loopholes fades away.

They don't even always have a price advantage anymore, especially if there's a
surge. I needed a cab from Chicago Midway to my hotel last night, Uber's
upfront price was $48 (and an eight minute wait), a regular taxi was $40
(including 15% tip) and no wait. I took the latter.

~~~
aianus
In my experience, whenever Uber is surging enough to make cabs cheaper (2.5x
in my city), there are no cabs to be found. That or the cabs try to scam you
by asking for extra cash off meter (happened to me on New Year's Eve).

~~~
sekasi
It's interesting that you call Uber 'surging' but cabbies doing the same
'scamming'. I understand what you're saying but they are quite comparable..

~~~
fernandotakai
because taxi drivers cannot, at least where i live, by law, change their fare.
uber/lyft told me (and i agreed by using their service) they would change the
fare based on demand.

~~~
beedogs
So, as long as they use the proper terminology, you're fine with being
scammed.

------
briandear
Why not just cut GST for everybody? Instead of taxing Uber more, tax taxis
less. Drivers and Uber still pay income taxes, fuel taxes, relevant tolls
right? If they want to simplify taxes -- as they claim, the best way to
simplify is simply to eliminate.

Lower fares mean more revenue for drivers and Uber and thus more income taxes
collected. Removing taxes from goods, means lower prices which means you sell
more and then generate more tax revenue. Laffer Curve 101.

~~~
prolly_a_moron
> _If they want to simplify taxes -- as they claim, the best way to simplify
> is simply to eliminate._

Because consumption taxes are the most efficient form of taxation. You want a
private chauffeur? Pay up.

> _Lower fares mean more revenue for drivers and Uber_

Huh? Only if the driver is working a lot harder.

~~~
jy1
It's possible if there's significantly higher utilization to offset the
decreased cost. Today a significant portion of the driver's time is waiting
around doing nothing.

------
abandonliberty
The real issue here should be the abuse of the small provider provision
'hobby' tax code exemption for businesses netting <$30K that provide _ride
sharing_.

Uber should fail on both of those counts, but instead the law is changing to
end that exemption. This appears unfortunate to me as we could use continued
innovation in the ride sharing space.

------
pja
Same thing is also going on in the UK: [http://www.gizmodo.co.uk/2017/03/meet-
the-uk-barrister-suing...](http://www.gizmodo.co.uk/2017/03/meet-the-uk-
barrister-suing-uber-to-make-sure-it-pays-vat/)

------
lux
Isn't this the same thing as the dispute in the UK over collecting VAT taxes?

[https://news.ycombinator.com/item?id=13921048](https://news.ycombinator.com/item?id=13921048)

------
m23khan
isn't uber still cheaper than taxi in Canada despite the application of HST
now?

~~~
Noseshine
Aren't Uber fares subsidized by its investors?

[https://news.fastcompany.com/investors-are-
paying-2-billion-...](https://news.fastcompany.com/investors-are-
paying-2-billion-per-year-to-subsidize-your-uber-ride-4026256)

------
beedogs
Anything that punishes Uber is fine by me.

------
thrill
<parody>The new national budget unveiled Wednesday by Canadian Prime Minister
Justin Trudeau's Liberal government took aim at document processor providers
such as Microsoft Word [MSFT], to force them to collect the goods and services
tax (GST) on every document created using their software. Trudeau stated,
"(The Royal) we are quite disappointed that many attorneys and other value-
added providers within Canada are creating documents that result in multi-
million (Canadian, but still...) dollar settlements without a tax being
gathered on the value those documents add to the case. Why, individual
attorneys can download this software right from Microsoft, create documents
worth a fortune to their clients, and not pay us a (Canadian, but still...)
cent for the use of that software! Each attorney and complainant ends up
having to pay us directly, and that creates awareness and complaints from
taxpayers - tres horrible, I say.".</parody>

~~~
MattRix
Now imagine that Microsoft Word was being used to do the selling and payment
processing of those documents and it starts to make more sense...

~~~
problems
Uber is essentially just a matcher and payment processor that takes a cut,
they don't own vehicles or employ drivers - will they only have to pay taxes
on their cut?

~~~
run4yourlives2
The consumer pays Uber. That is the point of sale. That is where the sales tax
is collected. This isn't rocket science.

To your - bad - analogy: If MS was selling templates created in word by you to
a marketplace, you can bet that GST would be paid on them by the consumer to
MS.

~~~
LammyL
Yup. And if you, the template provider, had a GST number (you are a business
or have sales over $30k), you would also be charging Microsoft the GST for the
sale. It is not a problem for MS since they would just claim it back as an
input tax credit and it would be net zero for them.

Consumer pays GST to MS. MS pays GST to a GST collecting template provider. MS
and template provider both pay GST to government, but MS gets an input tax
credit for GST paid to template provider so that government doesn't double
dip.

This is what uber should be doing with their drivers but they prefer to have
prices 5-15% lower than their competition by applying their own legal
interpretation to Canada's tax laws.

~~~
MattRix
This is basically what happens on the Apple App Store, except that Apple
submits the GST directly to the government on the behalf of the app creator.
On paper it's the same as your example, it's just the GST money never actually
goes into the account of the app creator.

~~~
run4yourlives2
It's likely that Apple is just forgoing the input tax credit in this case.
They remit the GST on their sale and because they aren't charged any GST by
the app creator, they don't look to offset.

Now, the major issue here is that if the app creator is making $30K+, it is
THEIR responsibility to charge GST, which means that if there is no mechanism
to charge in addition to the price, it's automatically inclusive. The CRA
doesn't care how you collect the tax you owe, they just care that you pay it.

For a vast majority of app creators, $30K probably is a target they are on the
lower side of, but I'd imagine people making a living on the apple store, the
GST is coming out of their revenue directly. At least, that's how CRA would
look at it.

Now that being said, CRA might be treating this entire industry as an
undefined gray area for the time being, particularly since they are getting
the GST on the final sale by apple, but I don't think that will last long.

