uber cash payment

Unlike a salaried employee, who has nowhere to hide from the taxman, corporations have the avenue of employing legal means to avoid or minimise tax by shifting earnings across the globe, capitalising on loopholes. That’s what Uber has been doing, and Uber drivers may soon have to pay taxes should the government fail to impose tax on Uber’s ride revenues, The Sun reports.

It adds that over the years, Uber’s tax planning has succeeded in dodging tax legally from governments around the world including Australia, Canada, Hungary, UK and US tax authorities. It was reported in the UK that Uber is legally avoiding tax by transferring its ride income to its sister company in Netherlands. Also, less than 2% of Uber’s total revenue would be subject to taxes by the US tax agency, according to reports.

According to Fortune magazine, Uber has created subsidiaries in every country it operates in as well as forming two subsidiaries in Netherlands – Uber International CV and Uber BV.

uber-paris

The subsidiaries in each country do not earn directly from the riders, but the fare is sent to Uber BV, as listed in your credit card statement. Uber typically sends back 80% of the ride payment back to the driver via another Dutch subsidiary and keeps 20% as revenue. The mag calls this “ocean income, because it sits in a gray area between national tax authorities.”

What’s a determined government to do? A government insider told The Sun that the registration drive for Uber and Grab drivers as part of the recently mooted “e-hailing” initiative would hold the key for taxation. “The drivers database will be important for monitoring, licensing fee and tax purposes,” the paper’s source said.

Contacted by the free daily, a senior officer of LHDN said the board could impose withholding tax on special classes of income to Uber Malaysia Sdn Bhd under Section 4A of the Act for transferring Uber fare revenues to non-residents.

RM Credit Card

Last June, Land Public Transport Commission (SPAD) chairman Tan Sri Syed Hamid Albar said Uber’s cashless payment system did not benefit the country. “The money goes out of the country and our ringgit does not circulate locally,” he said. Uber has recently started to accept cash for rides.

The move to legalise and regulate app-based ride hailing services such as Uber and Grab is on track. After receiving endorsement from the Special Economic Committee chaired by Prime Minister Datuk Seri Najib Abdul Razak last month, SPAD will table a paper to the Cabinet this month for final approval.

Uber/Grab aside, the “e-hailing” model also includes details to transform the taxi industry, public service vehicle (PSV) license requirement for private car drivers, annual vehicle inspections and comprehensive insurance coverage. More on the planned comprehensive revamp here.