Uber has decided to increase prices by approximately 10 per cent in each Australian city where UberX is available.
The increase comes after the ride-sharing company challenged the Australian Taxation Office’s position in the Federal Court of Australia over its GST demand. Following a failed appeal in a letter to Treasurer Joe Hockey obtain by AFR Weekend, to mediate the feud the San Francisco-based ride-sharing service filed an application with the Federal Court to challenge the ATO’s GST demand. The company claims the agency is unfairly targeting its drivers using outdated laws that were written when the ride-sharing concept was non-existent.
Uber made it clear that the price increase is not a tax on Uber, “but rather an additional tax” on all those who earn a flexible income by sharing rides on the company’s platform. The move also means drivers who share only a few rides per month “may encounter unnecessary red tape such as the filling of quarterly business activity statements with the ATO.” The position taken by the Taxation Office jeopardises the flexible income and harms job creation.
Uber acknowledged drivers should pay an appropriate share of tax, but it argued they are treated differently than “any other participant of the sharing economy.” The ATO recently ruled that people who use Uber to offer rides using their private vehicles should pay GST from the first dollar. However, most small businesses only pay GST once they earn over $75,000 AUD a year.
Brad Kitschke, director of public policy for Uber Australia recently told AFR Weekend the ATO is applying an interpretation of tax law written in 1999 to a 2015 business model and claimed “there needs to be a wake-up Australia moment on this.” Kitschke wrote to the Treasurer urging him to ask the agency to delay the GST imposition until October.
The San Francisco-based company was unhappy with the fact that other fast-growing businesses such as room-sharing service Airbnb have not been ordered to collect GST. Uber has previously dismissed comments by tax commissioner Chris Jordan that the company has been playing dirty to win the media debate over the GST ruling.
In early August, Uber was telling its UberX drivers they “might be required to register for GST.” Although the U.S.-based company emailed and phoned drivers advising them about the new tax rules, the language it used left obligations unclear, Fairfax Media reported. Uber claimed drivers do not have to register for an ABN, adding “this is a matter for each partner to consider” and sent them a link to accounting firm H&R Block, which currently offers discounted tax advice to UberX ride-sharing partners.
Amanda Morris, founder of Share Drivers Australia association said Uber did not increase the price to compensate its drivers for the GST payments, Fairfax Media revealed. Ms Morris added that a lot of people believe the GST obligations and recent fare reductions have made ride-sharing unprofitable.
The U.S.-based company emphasized that even with the price increase UberX will still be on average 25-35 per cent cheaper than a taxi across Australia.