Canada is targeting ride-sharing providers such as Uber Technologies Inc by levying taxes on the companies for the first time.
The government said it is leveling the playing field for Canadian taxi services competing with ride-sharing providers by making them pay taxes. It will be the first time such companies will be charged the federal goods and services tax in line with cab companies. Companies such as Uber would be forced to collect taxes on every ride, just as Canadian taxi operators do.
Uber spokeswoman Susie Heath on Thursday said the tax affects riders and drivers, and that taxing ride-sharing companies does not help taxis compete on pricing since Uber would remain a significantly more affordable option.
“This is not a tax on Uber and we continue to pay all applicable taxes on our services, as well as significant licensing fees to cities,” Heath said. “This tax makes it harder for ride-sharing to be price competitive with personal car ownership. It is deterring innovation and the possibilities that come with more shared rides that can make cities less congested and polluted.”
Canadian Prime Minister Justin Trudeau’s Liberal government made the tax announcement this week when delivering its budget.
Canadian Minister of Finance Bill Morneau said it is important to have a tax system that is fair and less complex, adding that the government already taxes taxi companies, so taxing Uber “is consistent with what Canadians expect.”
Canadian Taxi president Marc Way said he supports the government’s decision to tax Uber fares.
“This is a great move towards leveling the playing field,” Way said.
The budget statement estimates the change would raise C$3 million (US$2.5 million) in new revenue this year, rising to C$5 million in a few years.
The tax could translate into higher fares for Uber customers in Canada and would be the latest blow to the US$70 billion company.
Separately, Uber is rethinking its car leasing strategy in India, as drivers have returned dozens of leased cars early after the company cut incentives, people familiar with the matter said.
Uber had planned to buy 15,000 new cars last year and lease them out in a bid to attract more drivers, but it suspended the scheme for a while in December after leasing just a third of that total.
After burning through millions of dollars over three years in a battle for market share with local rival Ola, backed by Japan’s Softbank Group Corp, Uber has cut the incentives it gives to drivers and raised the fares it charges passengers.
The incentives — from free smartphones to cash bonuses worth as much as double a day’s fares — meant drivers could earn as much as 120,000 rupees (US$1,838) a month.
Those incentive payments have been pared back, in some cases to as little as 10 percent of fare income. Ride fares have risen to 1.5 rupees per minute from 1 rupee.
Uber has said its services are in 29 Indian cities and it has more than 250,000 drivers on its platform, but it lags Ola, which says it operates in more than 100 cities, with about 550,000 drivers.
Additional reporting by Reuters
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