There is a strong chance that the ridesharing service Uber will be forced to charge higher fares in Australia following a Federal Court ruling that it must pay GST. Moving forward, Uber drivers will be charged GST like other taxi services, a cost that is almost certain to be passed on to the customer.
Uber had been attempting to dodge its GST obligations on the argument that its drivers earn less than $20,000 per year and therefore should be exempt from the goods and service tax. (Australian businesses that earn less than $75,000 per year do not need to pay GST.)
However, a Federal Court ruling on Friday ruled in favour of the ATO. While the average earnings of Uber drivers were not disputed, the court found that UberX should be classed as a taxi service. Taxi drivers must pay GST regardless of their earnings.
Uber unsuccessfully argued that its employees are not taxi drivers, citing the inability of customers to hail a cab off the street or use a taxi rank. The court dismissed the challenge and ridesharing services are now officially recognised as taxis in Australia.
The upshot of all this is that Uber drivers will now need to pay GST to the ATO with fares likely to increase as a result. Needless to say, the decision has gone down particularly well in the taxi industry.
“UberX drivers cannot expect to be treated as though they operate in a tax free zone. They should pay tax just like their taxi driver counterparts,” said Australian Taxi Industry Association chief executive Blair Davies.
“Taxing [Uber] differently to the equivalent trip in a licensed taxi would be unfair and constitute a regulatory distortion.”
Whether the cost of GST will be partially or fully passed onto passengers remains to be seen. If it’s the latter (which seems likely), you can expect a $40 fare to cost you closer to $45 moving forward.
[Via Business Insider]