Uber to Halt Taiwan Services Under Regulatory Pressure

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By Yu-Tzu Chiu

U.S.-based Uber Technologies Inc. will suspend its Taiwan operations Feb. 10 amid an ongoing tax evasion controversy, under orders of Taiwan’s transport authority which issued massive fines against the company.

Uber announced the suspension in a Feb. 2 statement, when Taiwan’s transport authority imposed 11 fines for violations amounting to 232.1 million Taiwan dollars (7.47 million) on the company. More fines are expected to be issued for violations caught earlier, with the total set to reach 1.1 billion Taiwan dollars ($35.44 million).

Uber reiterated Feb. 3 that it isn’t a taxi company. “So it’s absurd to ask us to register as one,” it said in a statement.

“We want to be regulated but regulating Uber like a taxi is like eating soup with chopsticks. It just doesn’t work,” Uber said.

According to the company, ridesharing—or the use of private cars for public transport—has been embraced in more than 72 countries.

Tax Woes

Regarding the tax evasion controversy, Uber stressed that it has been collaborating with the government to find a way out.

In November, the tax authority asked Uber to pay 135 million Taiwan dollars ($4.25 million) in back taxes and fines.

Uber has been accused of illegally providing passenger transportation services and of tax evasion since it began offering its services in Taiwan in 2013.

Amid long-term confrontation between Uber drivers and local cab drivers, Taiwan’s legislature decided in December to introduce heavy fines for illegally providing passenger transportation services.

Under the revised Highway Act, which took effect in early January, for a company like Uber providing ride-sharing services, a violation can result in a fine of as much as 25 million Taiwanese dollars ($805,373). Previously, the maximum fine was 150,000 Taiwan dollars ($4,832). In addition, for each violation, the Uber driver could face a fine up to 200,000 Taiwan dollars ($6,443).

E-Commerce VAT

“We have been an active supporter of the new cross-border e-commerce bill,” Uber said, referring to the December announcement requiring foreign cross-border e-commerce companies to register and pay a 5 percent value-added tax on digital services and products they sell in the country.

“We recently sat down with the Ministry of Finance to discuss the bill together with other multinationals like Apple and Agoda; and confirmed in writing, our willingness to comply with this new mechanism—once it arrives,” Uber said.

Uber said it had made “a tough decision” to suspend operations from Feb. 10.

Hsu Kuo-yung, spokesman for the Taiwan Cabinet, said Taiwan has been shaping a friendly regulatory environment for start-ups with innovative business models but they have to abide by the law.

“Unlike its practice in other countries, Uber doesn’t ask its drivers here in Taiwan to get a professional driving license. For local taxi drivers, it’s unfair,” Hsu told Bloomberg BNA in a Feb. 3 telephone interview.

The ride-sharing company registered in Taiwan in 2013 as an information-services company. More than 10,000 Uber drivers have provided 15 million rides in four cities on the island.

Regulatory Harmonization

Hsu said the Taiwanese government has launched regulatory harmonization to allure more foreign investment. However, long before the amendment of Taiwan’s Value-added and Non-value-added Business Tax Act, Uber had failed to pay tax.

In addition, the income tax on Uber drivers was not accordingly levied due to the lack of registration as a professional driver, Hsu said.

“If Uber wants to continue to stay in Taiwan, the company and its drivers have to abide by all laws in Taiwan,” Hsu said.

Uber said Feb. 2 it is understandable that the Ministry of Transportation and Communications must enforce the new amendment. “Faced with such a dilemma, we think that we need to come up with a new approach,” Uber said.

The company said it hopes to reopen dialogue with the government, led by President Tsai Ing-wen, to allow the development of innovative transportation technology in Taiwan.

The Cabinet, the government’s executive branch, has announced that the effective date of the e-commerce VAT amendment is on May 1.

Slow Legislative Process

Tax practitioners said the somewhat slow process to revise tax regulations applied to foreign cross-border e-commerce companies has also made impacts.

“So once the new amendment becomes effective, it may be less controversial,” Cheli Liaw, a partner with Deloitte & Touche in Taipei, told Bloomberg BNA Feb. 3.

There may be more compliance issues in store for Uber if it wishes to remain in the jurisdiction.

“Before Taiwan revises more tax laws, which are applied to foreign cross-boarder e-commerce firms, to deal with sales and income taxes issues, Uber will have to set up a local taxi company here and pay all kinds of taxes in accordance with the existing laws, if it wants to stay,” Li-li Chou, a partner of PwC Taiwan, told Bloomberg BNA Feb. 3.

In a statement on its website the Ministry of Transportation and Communications welcomed Uber’s decision to suspend its service on the island.

To contact the reporter on this story: Yu-Tzu Chiu in Taipei at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

For More Information

The statement from the Ministry of Transportation is at: http://www.ey.gov.tw/UnitRSS_Content.aspx?n=8092BD84714005C0&s=DC067BC418C3A4C7

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