Making sense of the taxi industry’s Uber crisis: The brief outline of an ‘idiot-proof’ guide for confused politicians, disinterested media and a misinformed public

The advocate general of the European court of justice (e.g. The Guardian 12/5/2017) recently determined that Uber provides a transport service (rather than merely a digital service as it has regularly insisted) and therefore should be regulated as a conventional transport company. This was at last some relevant high-level legal and policy recognition of what global taxi industries have long been saying yet ignored or misunderstood. This includes groups of Uber’s own drivers who have taken legal actions against this ultimately conventional off-shore corporate monopoly raider and tax avoider. This is also on the basis that they have been deceived by a company which, in any case, has dishonestly promoted work opportunities whilst aiming to have a global monopoly with driverless cars in the future. And when a prominent financial analysist Hamish Douglas also recently (AFR, 24/5/2017) pointed out that Uber is effectively a non-sustainable ‘ponzi scheme’ – he was reinforcing a similar conclusion we put on record in a June 2016 report to the Qld Government’s OPT Review (Richards, 24/6/2016).

As is so commonly the case in many other Australian industries currently undergoing often unnecessary and counter-productive ruination under the clumsy aegis of so-called ‘de-regulation’ and ‘innovative disruption’, there are many in the taxi industry who cannot believe how the government (i.e. politicians as well as bureaucrats), the public and media outlets in Queensland have all so easily and so disingenuously been misled or even ‘conned’ by Uber. This is even despite both (a) new evidence of how from the outset Uber has regularly acted ‘illegally’ to circumvent existing policy standards and to also persuade policy-makers to retrospectively approve its operations [i.e. The New York Times investigative report in March 2017 that identified how Uber had used its Greyball program to intentionally deceive authorities in Australia and elsewhere to evade or thwart existing regulations as well as for misleading purposes of persuasion], and (b) growing related evidence of how the Uber model is basically an off-shore tax-avoidance strategy which signs up and then charges drivers as if an employer but then pretends to be merely ‘digital service’ – whilst then also denying their drivers any normal working or even personal rights including basic due process in disputes.

Our aim here is to briefly sketch an ‘idiot-proof’ outline to help provide a better understanding of the Uber crisis faced by Australian taxi industries in terms of three central and related points which are not just widely ignored but grossly misunderstood by nearly all politicians, media commentators as well as affected members of the public. First, everyone tends to assume that ridesharing apps (including the Uber model) simply involve a small booking fee to link up cars and passengers like Airbnb free of the corporate impulse to exploit and monopolise – when in the case of Uber at least this is really not so. Second, no relevant politician or bureaucrat let alone either media analyst or mere arm-chair social media commentator, has yet adequately focused on or really cared about how the effective legalisation of Uber in Australian states has (already) signalled the effective end of the universal service obligations (USOs) by which taxis are not just expected but required to service every relevant local community, to never refuse a legitimate fare, and to generally support the basic needs of the wider public (especially of at-risks groups such as the disabled, the elderly, and others at the margins) as well as a now debased legal-policy requirement. [Reflecting the hasty inconsistency of how as Uber was effectively legalised by the state government in Qld as elsewhere, politicians continue to assume that the USO of taxis will somehow stay in place (whilst this is not required of ridesharing cars) as they further contradict any semblance at all of the very ‘level playing field’ market conditions used to justify legalising an Uber model of commercial share-riding in the first place].

And the third central point (which we have gone into depth about elsewhere, so will merely point out again here), is how – as also the case in so many other local industries needlessly destroyed by hasty, ill-informed and non-sustainable policy-making in similar fashion in recent times – Australia state government policies to so carelessly and destructively ‘legalise Uber’ have been a simply world-class effort as well as example of top-down policy failure and refusal. In other words (and leaving aside the US), Australia is almost without peer in the world in terms of local politicians and media failing or even refusing to look at how Uber’s predatory corporate strategy has either been resisted or at least ‘neutralised’ in some fairer way in most other countries around the world where they have sought to apply their model – therefore reinforcing the local public lack of awareness and knowledge about these matters.

Instead of a mere booking fee to link up drivers and passengers as everybody seems to think, Uber uses various tricks (e.g. initial promotions and discounts, an off-shore payment system, an unfair contract arrangement without any real commitment to due process behind it) to lock its drivers into a closed system and to flexibly vary its charging regime for customers in predatory fashion. Uber drivers – many of them ex-taxi-drivers who are also initially seduced – thus typically soon discover that is not only not as profitable as promised but also opens them also up to various additional liabilities (i.e. without any of the protections and guarantees about insurance, security, legal standards, etc. they might normally expect) as well as various unforeseen costs. As well as deceptions about likely tax implications, drivers have to pay their own running costs and be liable for the hidden costs of various risks to their required investment of a suitable car – including the real risk of being unfairly thrown out of the Uber system because of a relative lack of due process if any dispute arises.

So whilst most assume they are only paying a small booking fee to Uber basically for jobs, Uber drivers are actually forced to pay Uber substantial additional commission – this varies and keeps changing but is generally around 25% of each fare at present. At the end of the day and after initial promotions, this is often roughly equivalent to or little better than what taxi-drivers make especially when the risks and hidden costs are taken into consideration. All Uber fares in Australia are thus paid directly to the Uber operations in Holland for tax-avoidance purposes (Uber reportedly pays just 1% tax on its income there) whilst local Uber drivers remain in legal limbo as the Australian Tax Office tries to make these drivers pay personal income as well the recent requirement of at least a goods and service tax percentage.

There is irony in how this is equivalent to the additional costs for the average driver in terms of the very over-regulated and unsustainably expensive running costs plus bailment conditions for drivers which have beset so many taxi industries in Australia as well as overseas with government collusion (with Qld leading the way with this). In other words, the typical taxi-driver income in Australia has long been comparatively low whilst fares have been relatively high because of all the hidden costs and requirements added to the small nominal taxi-booking fees for radio jobs. The real costs are not just the normal operating costs but lie in the out-of-control taxi plate license prices which were not just made possible but encouraged in recent decades as part of state government ‘agreements’ (i.e. ‘deals’) with the main taxi-booking companies. As a result, taxi drivers in Australia typically struggle to make a living (and as a result have had to be increasingly recruited from overseas third world countries) as taxi management companies mainly focused on the interests of investor owners in terms of the creation and overseeing of elaborate and protected bailment arrangements where normally drivers have had to pay around half of their take (i.e. in return for not just the provision of a car but the grossly over-inflated cost of the taxi plate license).

These arrangements were also integrated into earlier government policy and procedures for the taxi industry along with the similarly elaborate (i.e. over-regulated) ‘security measures’ which the taxi companies in effect ‘agreed’ to administer on behalf of the government. Present state governments have it seems, conveniently forgotten their complicity in the very same expensive ‘over-regulation’ they now purport to want to fully ‘de-regulate’. This is a flip-flop which continues to ignore the common sense public-private balancing of commercial interests and various standards of safety and security in the public interest – also,  how professional car driving can and should be better paid and with a better image, a valid employment option for the average Australian in difficult times especially.

 

As elsewhere in Australia the nominal sacrificial lamb of the Qld taxi industry thus has been the owner-drivers (many of them elderly and now close to or ready for retirement) – not really the taxi companies per se. Taxi plate owners have seen their ‘investment’ in licenses effectively go from being valued at well over a half million dollars just a few years ago in the main South-East Qld centres to being a fraction of that if they could even sell these. Since the government brought in its new legislation to legalise Uber it has looked at providing some nominal compensation (projected to be about $20,000 for a first license) for effectively writing off the values which it also profited from and helped to maintain. Now it proposes to make taxi licences an annual registration like ridesharing cars as part of a very clumsy, inadequate, frankly ludicrous, and ultimately non-genuine effort to suggest it is serious about providing the taxi industry with a genuine ‘level playing field’.

In response to all this, it is painfully obvious that the taxi industry in Qld as well as elsewhere in Australia has not responded very well to its Uber crisis. It has taken a very defensive line which has failed to evoke any of the expected sympathy and understanding to persuade the media and public as well as governments. It has thus has failed to do any of the three main things which should have been the hallmark of a much more effective strategy: one, to expose the non-sustainable ponzi-scheme nature of the Uber model of ridesharing, two, to offer a more constructive policy alternative (to reckless ‘de-regulation’ response to previous industry ‘over—regulation), and three, to come up with a practical and constructive alternative solution which at least embraces a second-tier ridesharing alternative (ridesharing was never going to go away, and a non-Uber model of this was needed to support rather than destroy a viable local taxi industry).  As we have also pointed out elsewhere, such a ‘win-win solution’ if framed well as a ubiquity rather than scarcity model of personalised transport, can and should be part of overall transformed taxi industry which can offer a better income as well as professional image to all drivers (with the money staying in Australia), significantly cut fares across the board to encourage as well as less private cars on the road, and all of this whilst adequately protecting the important universal service obligation or public service aspect of personalised transport.

Perhaps the main reason why the taxi industry has done so badly so far (i.e. merely taking the line of an impossible aim to returning to the previous status quo) in defending its real interests is that such representative vehicles as the State Taxi Councils have tended to primarily represent the interests of a now generally obsolete function of taxi companies rather than taxi owners, drivers and customers. As is becoming practice in many other countries (e.g. the early version of the Grab model in South-East Asia) ridesharing cars can complement normal taxis where there is an effective ‘market’ of booking app providers which support both taxis and ridesharing alternatives on an individual basis in terms of a basic currency of small booking fees. This would require a genuinely independent taxi council to oversee a viable, flexible and balanced regulation framework, which might still involve but not be wholly dominated by taxi companies playing a more constructive role either in their original function as booking companies or as small-scale and operational taxi management companies.

In relation to the taxi industry’s Uber crisis, there has unfortunately been little or no interest by anyone in the general tax avoidance implications of this (i.e. big money going overseas whilst domestic budgets further undermined) nor conversely in the lost opportunity to re-calibrate the personalised transport (i.e. taxi plus ridesharing) industry as a win-win solution. This is especially so in terms of how with jobs lost in other sectors, professional driving can and should be revamped with a more positive and satisfying professional ‘service industry image’. Although this may come ‘too little too late’ for most in the taxi industry, the short-sighted and counter-productive as well as destructive aspects of new policies to simply ‘legalise Uber’ in a non-sustainable way will soon become very clear to all when the effects of the government effectively doing away with the universal service obligations for all ‘personalised transport’ become more evident and directly impact on especially the at-risk groups in society. Therefore, the long-term implications of this move needs to better exposed as a matter of priority.

What this is all pointing to (if not redressed) is an eventual Wild West situation where the ‘cherry-picking’ imperatives of Uber reach their logical conclusion – every day being potentially like New Years Eve where personalised transport drivers are only interested in  taking on only the ‘best’ jobs, where charging for fares is opened up to manipulated prices, and where marginal locations and peoples experience become increasingly desperate but  have little chance of having their needs being serviced at all. Such emerging implications of this ignored aspect of changed government policy is perhaps the real key to help politicians, media agencies and the public to better understand: (a) the fallacies of the government’s present policy framework, and (b) and a more viable win-win solution which needs to be sought as an urgent priority. Surely any ‘idiot’ should be able to understand that?

Richards, C. (June 24, 2016). Re-calibrating a sustainable future Queensland taxi industry: An inquiry into the strategic requirements of an optimal ‘win-win’ solution to the continuing crisis, Industry discussion paper on behalf of the Queensland Taxi Owners and Drivers Welfare Association.

Richards, C. (September, 2016). How Uber (like similar corporations) fools or intimidates just about everyone, Informal distribution.

Richards, C. (April, 2017). Framing any and all proposed Personalised Transport Reform Bill amendments with a more integrated foundation to ensure a sustainable future Qld industry, Submission to the Queensland Parliament Public Works and Utilities Committee.

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