This article titled “Uber lashes out at ATO ruling, saying it deserves different tax treatment to taxis” was written by Daniel Hurst Political correspondent, for theguardian.com on Wednesday 20th May 2015 03.05 UTC
Uber has argued it provides a “fundamentally different service” from taxis and deserves different tax treatment, despite an Australian Tax Office (ATO) ruling that ride-sharing drivers must charge goods and services tax.
The company said it would challenge the ATO’s “flawed” decision.
On Wednesday, the ATO issued general advice to people providing a range of services through the “sharing economy”.
The so-called sharing economy – also referred to as collaborative consumption or peer-to-peer – can encompass activities such as letting a room through Airbnb, or performing odd jobs or other activities for payment through Airtasker, or driving passengers in a car for a fare using a service such as Uber.
The ATO said people needed to register to charge the 10% GST if their annual turnover from a sharing-economy enterprise was $75,000 or more. But it said ride-sourcing services such as Uber were considered taxi travel under the GST law regardless of turnover, and drivers must be registered to charge the tax from the very first time they took a passenger.
“Affected drivers must register for GST, charge GST on the full fare, lodge business activity statements and report the income in their tax returns,” the deputy tax commissioner, James O’Halloran, said.
Uber said it was disappointed the ATO had “taken it upon itself to dictate government policy for the sharing economy by imposing a flawed interpretation of a law that was introduced in the 1990s upon participants of a new business model that is only one year old”.
“Today’s decision by the ATO is not a tax on Uber but rather, impacts the over 9,000 ordinary Australians who drive on the uberX platform,” said David Rohrsheim, Uber’s general manager for Australia and New Zealand.
“These are 9,000 individuals who will now be caught up in red tape before they even accept their first ride, and will then be hit with a tax on their very first dollar earned, unlike truck drivers, painters, online sellers, gardeners, other sharing economy participants, and every other small business who do not have to collect GST until their business reaches $75,000 per annum in turnover.”
Uber’s director of public policy in Oceania, Brad Kitschke, argued ride-sharing services were different from regular cab services, which also required GST to be charged regardless of turnover.
“Ride-sharing operators don’t do this job as a professional service,” he told the ABC. “They don’t do rank, they don’t do hail, they don’t do cash. It is a fundamentally different service than the traditional taxi and it deserves a fundamentally different treatment.”
Kitschke said most Uber drivers would work for 20 hours a week in Australia and “probably be earning $30,000 a year or less”, falling below the $75,000 threshold that applies to other small businesses for GST.
When the ABC interviewer suggested many regular cab drivers might scrape a living with similar earnings, Kitschke said that may be “a fundamental problem with the incumbent system”.
“There are many cab drivers who are scraping to make a living. I think we need to probably reassess whether or not that $75,000 threshold should be applied to the entire industry,” he said.
Kitschke also questioned whether the revenue to be captured by the GST ruling would exceed the administration costs. He called for a broad policy discussion on tax arrangements for the sharing economy.
“If someone, for example, was to use their car to pick up a pizza for an on-demand service, they wouldn’t be required to register for GST but if they pick up a person they are,” he said. “There is a fundamental lack of understanding in our current tax arrangements about the sharing economy.”
The ATO defended the ruling, saying it achieved a “level playing field” with the taxi industry, which had always had a different rule under GST laws and was not subject to the $75,000 threshold for GST registration.
“The tax laws which apply to activities conducted in a conventional manner apply in the same way to activity conducted in the sharing economy,” the ATO said.
People offering a room through sharing services such as Airbnb will not have to charge GST, but will have to declare the income they receive on their normal income tax returns.
“You do not count amounts you receive from renting out a room in a residential house or apartment in your turnover [for GST purposes],” the ATO said.
The Labor opposition accused the Coalition government of “ducking responsibility” for having a serious conversation about the sharing economy.
The shadow assistant treasurer, Andrew Leigh, said the ATO ruling showed the government was leaving it up to agencies to drive national policymaking on services like Uber.
“All companies should comply with Australian laws, but we should also be working to ensure those laws are fit for purpose as innovative new business models emerge,” Leigh said.
“Internationally, some authorities have ruled that sharing economy apps represent a different type of service which requires a distinct regulatory approach, but the Abbott government has been slow to recognise that new technologies may require the rules to be updated.”
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