Uber Loses Australian Tax Dispute Over GST
Uber is simply providing a taxi service and all its drivers must therefore register to pay goods and services tax, Australia’s Federal Court ruled.
The Feb. 17 decision, which could yet be appealed to the full bench of the Federal Court, is “one step in the journey of the tax laws grappling with the sharing economy,” said Martin Fry, a Melbourne-based tax practice leader at law firm Allens Linklaters.
The Australian Tax Office welcomed the ruling. “It is important that Uber and other ride-sourcing providers now work co-operatively with us to help assist their drivers to understand and comply with their tax obligations and claim their entitlements,” an ATO spokesman told Bloomberg BNA in an e-mail.
An Uber spokeswoman said “we are disappointed in the Federal Court’s decision today. We are reviewing the decision and will provide our driver-partners with more information as soon as we can,” she said in an e-mail.
Uber launched the proceedings against the commissioner of taxation in 2015, seeking to differentiate its driving partners from drivers of vehicles marked as taxis. It did so because a unique GST arrangement applies to taxi drivers.
Most professions only have to register to pay GST of 10 percent when they earn more than A$75,000 ($53,979). But taxi drivers have to pay GST no matter how much they earn annually—an arrangement designed to avoid fare distortions that would otherwise arise if only some drivers paid the tax.
Uber took the commissioner to court in an attempt to extract its drivers from the same wide GST net, which would mean its fares wouldn’t need to take account of the tax. The company sought a court declaration that its drivers don’t “supply taxi travel” within the meaning of s144-5(1) of the A New Tax System (Goods and Services Tax) Act 1999.
Uber noted that its drivers’ vehicles aren’t identified as taxis, don’t have “for hire” signs, aren’t painted in specified colors, don’t wait at pre-selected spots and don’t have a taximeter fitted.
In contrast, the commissioner contended that the definition of “taxi travel” shouldn’t be constrained to align with state and territory regulations that only apply to old-style taxi services. Instead, a taxi is any vehicle available for hire by the public that transports a passenger at his or her direction or a fare, the commissioner argued.
Justice John Griffiths agreed with the commissioner and held that the term taxi should be interpreted “broadly and not technically” and encompassed Uber vehicles.
However, the ruling won’t lead to an increase in Uber fares, because that has already happened. The ATO has expected Uber drivers to pay GST since August 2015, and Uber increased fares accordingly at that time pending the Feb. 17 decision.
Uber has previously come under scrutiny from a Senate committee’s long-running inquiry into corporate tax avoidance, where the company was quizzed on its practice of billing from the Netherlands.
“Uber Australia does not generate revenue,” Uber Australia and New Zealand’s director of public policy Brad Kitschke said at a November 2015 hearing conducted by the committee. “The Dutch company generates revenue.”
Kitschke said that Uber had about 15,000 drivers in Australia at that stage, and had provided nearly 10 million rides nationally.
In additional information submitted to the inquiry in February 2016, Kitschke revealed that the company paid tax of $249,280 in Australia in 2015, not including payroll tax.
Commissioner of Taxation Chris Jordan said during an April 2016 hearing that the company billed from the Netherlands “in that classic sort of activity-here-but-bill-overseas type of thing.”
“They hold information over there that we find very difficult to get,” he added.