uber cash payment

Earlier this week, The Sun reported that Uber drivers may soon have to pay taxes should the Malaysian government fail to impose tax on Uber’s ride revenues. The US-based company has a shrewd tax strategy that has so far escaped the net cast by tax authorities including those in Australia, Canada, Hungary, the UK and US.

The free daily has followed up with a fresh report quoting Uber Malaysia GM Leon Foong saying that drivers are responsible for their own tax affairs. “The taxation differs from driver to driver. Only they know their income from driving and other sources and what is taxable,” Foong told The Sun in an email interview.

Uber’s local arm does not generate income on the basis of fares. “Uber Malaysia is paid for providing marketing and support services to the Malaysian rider and driver community,” he pointed out, confirming that the fares paid via credit/debit card are wired to an Uber subsidiary in the Netherlands.

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“Uber in Malaysia does not collect fares from the Malaysian driver community,” he said, adding that between 70% to 80% of the fare collected from a passenger is channelled to the driver on weekly basis.

Asked by the paper if the company will be ready to comply with the possible scenario of Inland Revenue Board (LHDN) taxing income generated from fares collected when the government’s ‘e-hailing’ initiative takes off, Foong said that as a company registered in Malaysia, it will comply with all relevant local tax obligations (remember that fares aren’t channeled to Uber Malaysia, but Uber BV in the Netherlands).

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

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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.

Our take on this is that it’s not unfair for drivers to have their Uber/Grab income taxed. Salaried employees have nowhere to hide from the taxman, and no groups should be given a free ride.