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Control to tighten on Grab, Uber

Released at: 10:23, 08/01/2018

Control to tighten on Grab, Uber

Illustrative image from vneconomy.vn

Transport ministry looks to balance treatment afforded traditional taxi companies and ride-hailing apps.

by Quang Huy

The Ministry of Transport has proposed a series of conditions be introduced to balance the management of traditional taxis and ride-hailing apps Uber and Grab in the country after the latter’s two-year pilot saw arguments and occasional violence between drivers from the competing sides.

A draft decree replacing existing Decree No. 86 from 2014 on the conditions for the motor vehicle transport business highlights additional requirements for operations in the transport businesses via digital contracts and software, namely Uber, Grab, and any similar services.

The proposed regulations are aimed at striking a balance between the conditions that have been applied on local taxi companies, according to Minister of Transport Nguyen Van The. Feedback from taxi companies and transport associations were collected before the draft decree was finalized, he said.

Under the proposed legislation, businesses such as Uber and Grab would have to obtain legitimate licenses and complete registration for providing e-commerce services, certified by the Ministry of Industry and Trade.

A deal with specific terms would have to be signed between technology firms and transport companies. A logo with a minimum size of 9 x 8 cm must be placed on the front and back windows of vehicles.

Businesses that provide ride-hailing apps will need to cooperate with transport companies to provide sufficient and accurate information regarding their services, in order to facilitate tax collection. An electronic receipt for each ride must be sent to the General Department of Taxation under the Ministry of Finance.

Meanwhile, transport companies that sign electronic contracts with technology firms will be granted licenses for the auto transport business. They must ensure that the age of their vehicles does not exceed 12 years from the date of production.

Such a requirement would be applied to vehicles of less than nine seats and is similar to existing conditions for local taxi companies.

Questions regarding the multi-trillion losses Uber incurs annually were also raised by the transport minister, with him doubting that the ride-hailing company has been making such losses. 

Uber and Grab pay rates of 2 per cent corporate tax and 3 per cent value-added tax (VAT) as foreign contractors, while traditional tax companies pay 20 per cent and 10 per cent, respectively.

Taxi companies want the government to tax 100 per cent of Grab and Uber’s revenues, instead of just the 20 per cent rate shuffled to their headquarters (Singapore for Grab, Amsterdam for the San Francisco-based Uber, whose profits are booked through the Netherlands). The remaining 80 per cent that goes to drivers is taxed as personal income.

Most recently, a court in Ho Chi Minh City halted a case brought by the Netherland-based Uber B.V against the city’s tax department. The local company claiming to legally represent the ride-hailing service was in fact not authorized to do so.

The suit, a show of protest by the ride-sharing app after it was asked to pay VND66.68 billion ($2.95 million) in back taxes by the city’s tax authorities, was filed on December 20 by Mr. Chu Xuan Binh, a representative from the Uber Vietnam Co. Ltd.

Uber Vietnam is authorized by Uber B.V to oversee its business in Vietnam, but the Ho Chi Minh City People’s Court ruled that the authorization document, legalized by Vietnamese authorities in November 2016, contains no clauses showing that the Dutch company permits its Vietnamese unit to file a lawsuit or appear in court in Vietnam on its behalf.

The court therefore suspended the case. Uber retains the rights to file another lawsuit to request the court handle the case or lodge an appeal against the original decision, according to the Ho Chi Minh City People’s Court.

The showdown between Uber Vietnam and tax authorities in the southern city began when the ride-hailing service ignored a request to pay the VND66.68 billion ($2.95 million) in back taxes late last year.

The company later filed a petition against the tax claim to the Ministry of Finance, reasoning it had fulfilled its tax duties in the Netherlands in accordance with a treaty against double taxation signed between the country and Vietnam.

The petition was dismissed, with the finance ministry asking the company to pay the full amount as demanded by city tax authorities. With Uber Vietnam showing no signs of paying the taxes, the tax department gave it an ultimatum to pay the amount within ten days from December 12.

As the deadline arrived, Uber Vietnam had only agreed to pay VND13.3 billion ($585,900), prompting the tax department to enact a coercive measure: calling on five local banks to freeze the accounts of the company from January 1 to 10.    

During this period, all money channeled into Uber Vietnam accounts at Vietcombank, Eximbank, Sacombank, ACB, and Vietinbank are directed to the account of the city’s tax department, instead of Uber B.V. The measure was intended to be lifted only after the department receives the remaining VND53.3 billion ($2.35 million) in taxes.

Uber Vietnam then brought the issue to court, with the court eventually issuing a temporary measure preventing the tax department from enacting its coercive action.

Now that the temporary measure has been nullified and the lawsuit suspended, the tax department will consider restarting its plan to freeze Uber Vietnam accounts at the five major banks, Mr. Tran Ngoc Tam, Head of the Ho Chi Minh City tax department, said. “We will have an internal meeting to decide on when and for how long the account freezing plan should take place and inform the banks involved later.”

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