By Nassim Khadem
"Technology means we can have better regulation. In some areas our old rules can adapt. In other areas, new rules need to be developed … Just as technology has revolutionised our approach to business it needs to revolutionise our approach to business regulation." – Stephen King, 2013 John Freebairn Lecture in Public Policy.
The ACT government this week became the first in Australia to prove that it understands how business regulation can be revolutionised.
Taxi drivers will undoubtedly face more competition, and will have to innovate.
By introducing new rules around the operation of 'ridesharing' services such as Uber, consumers benefit through potentially cheaper prices.
Taxi drivers will undoubtedly face more competition, and will have to innovate, meaning the customer gets a better level of service.
Ride sharing service Uber is "pleased to partner" with the VRC to help transport racegoers. Credit: Dominic Lorrimer
The ACT government's reforms, which will take effect on October 30 and be delivered in two stages, are sensible.
They make sure that UberX drivers face the same police and roadworthy checks, and insurance and training requirements, as taxi drivers.
They also reduce hefty licence fees that have held back the taxi industry. Taxi industry licence fees will be cut twice by 2017, from $20,000 a year to $5000. Fees charged to hire care operators will also fall from $4600 to $100.
Like taxi drivers, rideshare drivers must also have a zero blood alcohol level and be drug-free. They will also have to make sure passenger information, including bank and transaction information, complies with relevant federal and ACT privacy legislation.
Taxi drivers, these ones in Melbourne earlier this month, are not so happy about the rise of Uber X ridesharing. Credit: Justin McManus
UberX and other 'ridesharing' service drivers will be restricted from picking passengers from the street or taxi ranks. But eventually, they may be able to pick up passengers from loading zones.
The rideshare companies, by stage two, will have to get formal accreditation that lasts five years and will have to give their drivers workers' compensation insurance.
Consumer needs are better protected: surcharges on electronic payments in taxis will be capped at 5 per cent, and for ride-share surge pricing may not occur during a formally declared emergency.
Other state governments will in the coming weeks and months under go their own taxi industry reviews.
Things get a bit more complicated in Victoria, where in the past, taxi owners dished out half a million dollars for licences. If these become worthless, people whose livelihoods depend on it would be devastated.
As the Grattan Institute's Jim Minifie has stated: there may be a case for compensation in some limited cases where there's clear evidence of hardship, but overall, not every driver will get compensated.
Then there's the question of tax: whether UberX drivers need to pay GST.
This is a federal issue, which had been conveniently palmed off by former treasurer Joe Hockey – who has publicly stated he's got issues with the GST-free nature of Uber – the Australian Taxation Office.
Until August, more than 9000 UberX drivers operating across major states in Australia had been able to avoid GST payments by arguing they fall under the $75,000 turnover threshold at which GST applies.
The ATO's guidance has confirmed that they have to pay GST.
Uber of course, which has everything to lose if it's drivers are forced to hike up their costs by 10 per cent, is working to protect its competitive advantage and is taking the issue to the Federal Court.
Uber's head of public policy Brad Kitschke says many of its drivers only work a few hours a week, and shouldn't have to undergo such a huge compliance burden.
"About 70 per cent of taxis work is street rank and hail, and then taxi bookings, which ride-sharing doesn't do," he says. "...why regulate someone who has small part of market, the same as someone who has a large part of the market?" he asks.
At some point, that equation may change. Uber – which in July was valued at more than $US51 billion ($74 billion) – has made no secret of the fact that it wants to grow its presence in Australian cities. The company, which currently employs 15,000 drivers across Australia, has been aggressively lobbying governments across the world to allow it to move in.
Kitschke sees the ACT government's decision as win for Uber. He says there's a case for the federal government to now examine whether it should reverse the ATO decision.
But the ATO, is rightly, standing firm. As Tax Commissioner Chris Jordan has said: "Imagine the taxi queue chaos if [taxi] drivers earning under the GST threshold could offer a 10 per cent discount."
The fact is Uber, which may not see itself in competition with taxi services, is seen by consumers as an alternative to taxis.
It has to abide by the same tax settings. Otherwise there really isn't a level playing field.
UberX drivers should pay GST.