Uber operations spark controversy in Taiwan

  • Date: 2016-12-27

I. Background

In April of 2013 the Dutch-based firm Uber International Holding B.V. received approval to set up a branch company in Taiwan (“Uber Taiwan”) to engage in data processing, electronic information and third-party payment services. In reality, however, Uber Taiwan began operating an online ride-hailing service using private drivers without commercial driver licenses, and has even expanded to food delivery services.

By dispatching drivers without commercial licenses to transport passengers or deliver food, Uber threatens road safety and violates food safety regulations. Riders entangled in consumer disputes or personal data leaks arising from Uber services thus do not receive full protection under Taiwan’s regulatory framework.

In September of 2014 the Ministry of Transportation and Communications (MOTC) began fining Uber Taiwan, pursuant to the Highway Act (Article 77, paragraph 2) for registering as a technology company but operating a transportation business instead. As of December 16, 2016 Uber Taiwan had been fined a total of NT$86.08 million (US$2.69 million) and had paid NT$62.86 million (US$1.96 million) of that amount.

The MOTC has repeatedly called on Uber to cease operating illegally and apply for a car transportation business license in accordance with Taiwan law. By becoming a lawful operation, Uber would be able to engage in healthy competition with other lawful operators, and work together to grow the industry and improve service quality.

 

II. Reasons for fining Uber

Most countries regulate public transport businesses because these services affect consumer rights and basic transportation safety. An appropriate level of government intervention is thus needed to maintain market order and protect the public interest.

Uber’s ride-sharing scheme is a new form of service arising from the sharing economy that must be subject to proper regulation, whether in terms of vehicle inspection, driver qualifications, compensation liability, consumer disputes, personal data privacy or financial transaction security. To protect the rights of riders and law-abiding operators, the government continues to clamp down on companies that operate without proper business licenses.

 

III. The government position on Uber

The government looks forward to the development of innovative industries and new economic models in Taiwan, and welcomes the arrival of foreign capital, technologies and business models. Companies that pursue innovative opportunities, however, must comply with domestic regulations. The government’s position on Uber is that it must compete fairly with other operators by coming under regulation, paying taxes, and purchasing insurance coverage.

A. Uber must pay taxes

Taiwan law requires any enterprise that operates a business, sells commodities or provides service within the country to pay taxes. In a sharing economy scheme, tax liability depends on where the transaction takes place. So if the transaction occurs in Taiwan, then all resulting revenues are subject to taxation by the Taiwan government. Uber has established a branch company in Taiwan to provide ride-hailing services, and although that branch conducts all of its transactions in Taiwan, it only pays business tax and business income tax on a portion of its revenues. The Ministry of Finance (MOF) will therefore conduct a tax investigation into Uber’s Taiwan operations, purse unpaid taxes and fine the company accordingly.

B. Uber must comply with domestic regulations

Most governments regulate automobile-based transport businesses to ensure the safety of passengers and protect consumer rights. Uber Taiwan must take on its corporate social responsibility and register as a taxi transportation company, cease all unlawful operations and cooperate with other legal operators. Regarding Uber’s violations of the Highway Act, the competent authorities will enforce the law strictly to maintain order in the market.

 

IV. Complementary measures

To regulate the growing sharing economy while meeting consumer needs for different forms of quality car-riding services, the government is adjusting regulations, promoting a diversified taxi program, and providing flexible transportation in remote areas. Taxi operators are also receiving help in developing new technologies so they can offer more types of services and be competitive in the internet era.

A. Adjust regulations

1. Amendments to the Highway Act:

To prevent the type of market chaos caused by Uber Taiwan, the Legislative Yuan approved amendments to the Highway Act on December 16, 2016. The president promulgated and implemented the amended act on January 4, 2017, and it came into force on January 6, raising fines on illegal operators from NT$50,000-NT$150,000 (US$1,562-US$4,686) to NT$100,000-NT$25 million (US$3,124-US$781,006). Citizens reporting unlawful drivers will also receive rewards.

2. Amendments to the business tax act:

The MOF has drafted amendments to the Value-added and Non-value-added Business Tax Act that require foreign e-commerce businesses operating in Taiwan to register and pay business taxes. These changes were approved by the Legislative Yuan on December 9, 2016 and are expected to be implemented in 2017.

B. Promote a “diversified taxi program”

To encourage cab drivers to use internet technology to offer diversified services and improve the quality of taxi transportation, on October 25, 2016 the MOTC announced regulatory guidelines for a diversified taxi program, to be launched in 2017. Drivers of “diversified taxis” will be allowed to set their own rates, use non-yellow vehicles, and—similar to the Uber model—must work through an advance booking app and post information on themselves and their vehicles.

C. Provide more transportation options in remote areas

The MOTC has expanded its Demand Responsive Transit System (DRTS) to more rural locations to make public transportation more convenient for local residents. This flexible shuttle bus model allows residents to pre-book bus service and encourages them to use public transport, which will create a sustainable local transportation system.

 

V. Conclusion

As the sharing economy continues to grow, the government welcomes the development of innovative industries and new economic models in Taiwan. While transportation providers and law-abiding cab drivers are also encouraged to use new technologies and information software to create diversified and convenient ride services that improve service quality and passenger safety, they must comply with regulations and register with the authorities in order to compete fairly with other lawful operators. To further soften the impact of these new business models on traditional sectors, the government will amend laws and regulations to build a fair business environment that offers win-win solutions for all.