Ride Sharing Services: Legal and Compliance
From my previous blog, I talked briefly about regulatory issues around Ride Sharing Services (RSS). This week, I will be unpacking it in more detail to understand its implications to the society and firms.
There has been an ongoing debate whether RSS companies are technology firms or transport operators. Until this is resolved, it will be hard for any government body to identify which policy needs an amendment to include RSS rules.
If I was asked to summarize all the RSS legal issues I have seen, read and heard, I could consolidate them into one argument. “There is no fair level playing field for traditional taxi drivers and RSS driver partners.” RSS firms like Lyft, Uber and Taxi Magic are not complying with the same requirements as taxi companies. How should the governments manage this issue?
If you are following the news here in New Zealand (NZ) and abroad, controversies about RSS’ compliance to regulations have been in the spotlight for quite a while now. There are no clear indications when these issues are resolved. This scenario is similar to an article I read about Conceptual Issues and Policy Challenges, multi-national firms like RSS companies must adapt and comply with local policies in order to succeed.
Issues relating to RSS’ eligibility to operate are always raised globally. I will be exploring three of the major concerns:
- Insurance and tax requirements- In my last blog where I talked about RSS payment systems, I briefly discussed about RSS tax implications. If RSS companies introduce other payment methods (i.e. cash payments, over the counter, bank to bank transfers, etc.), it will open up some questions on tax obligations and compliance. RSS companies must factor in tax dues, foreign exchange rates and local/international fund transfer policies (i.e. Anti money laundering law) when planning their operational expense budgets and identifying pricing structures.
Another point to note is, RSS companies are currently not obligated to report details about its driver’s earnings (including tips received). Payments are managed centrally via the RSS software application, and no regulations mandating RSS companies to report income for each of its drivers.
Tax obligations are passed on to drivers where they need to file their individual tax returns. The government has no way to cross check if the earnings declared by drivers (for tax purposes) are true and correct. It will be difficult for tax agencies to track, monitor and compute the right amount of tax dues.
For some countries like the US, tax compliance for RSS will be a lot more complex. For example, each US state follows a different tax structure. It will be difficult for policy makers to implement rules on RSS businesses as some states hasn’t acknowledged its operations to date.
In the current RSS contract agreements, the responsibility for safety and insurance is passed on to drivers (as they are treated as contractors). Some states in the US have already implemented stricter rules on insurance requirements, and mandated RSS companies like Uber and Lyft to have an insurance cover before they can operate.
However, this rule has not been cascaded to other states/countries, which means, there are RSS drivers (in some parts of the globe) who are actively driving without insurance coverage. It is hard to impose a rule (on insurance) because there is still a question whether RSS cars are private or public vehicles. Insurance coverage and rates are different for each type. It will be difficult for government agencies to impose a generic rule for taxis and RSS providers.
I reckon, regardless what type of vehicle is used to provide transport service, the same tax and insurance requirement should apply. There must be:
a. Regulations on acceptable fitness requirements for RSS drivers and vehicles.
b. Policies on minimum insurance coverage for RSS providers (as they still drive passengers with them regardless what type of vehicle they use).
c. A tax structure that is acceptable and fair for RSS firms and local transport companies. There must be a standard way of reporting RSS income transactions to the inland revenue agencies to properly track and compute tax dues.
- Cross-border policy conflicts- How do you resolve cross-border issues? What happens if the passenger needs to travel from one state to another? Which state law should apply? In Australia, regulations are more complex. As an example, RSS is now legal in New South Wales but remains illegal for Queensland. Government agencies cannot implement a standard policy for RSS as there are local policies to consider.
Implementing rules in the RSS sector is possible.
Government agencies must work together to implement an acceptable regulation for RSS companies providing services across states or jurisdictions. This can be carried out by aligning rules across governments/states and communicate them to RSS stakeholders. This approach has been done in the financial sector (i.e. policies implemented across countries for anti-money laundering).
- Licensing- There has been an ongoing debate on what license RSS driver should have. As an example, RSS companies allow its drivers in NZ to operate without P license (license needed to drive a vehicle with a passenger). The New Zealand Transport Agency has not resolved this until now because the vehicle used in the service is a private car. Even if the government impose rules on RSS operators, NZTA authorities will have a hard time tracking offenders as it is difficult to differentiate RSS cars from private vehicles.
This sparked many protests among local taxi drivers. For local transport groups, it is unfair and irresponsible for RSS companies to drive passengers and operate without the P license. The NZ government has begun implementing stricter rules for RSS companies, but this is still in the process of being formalized as of early August 2016.
In my perspective, same requirements must apply (i.e. P- license type) to any commercial drivers. At the end of the day, they all drive passengers with them (regardless which car they use) and it is important that drivers have the proper qualifications.
All of the three concerns raised above relates back to the overarching RSS challenge on eligibility to operate in a country or jurisdiction. So how do we exactly solve these issues?
RSS is a disruption to current transport business models that we know. Change is inevitable. I think it is about time for the society and government agencies to accept that the RSS companies are here to stay. The earlier they accept this, the earlier they can move forward and think of solutions.
Can you think of other RSS political and legal considerations? Are there smart ways to address the policy and regulation issues? I would like to open a conversation to all my readers, and hopefully, you can provide your inputs and trigger a healthy discussion.
Feel free to send in your inputs!
In my next blog, I would like to explore the RSS cultural considerations and how it impacts the society and policy making in New Zealand (and around the globe). It will be interesting to see how culture impacts RSS and vice versa. This is a topic area that I want to explore more as it covers perceptions of society towards RSS and how innovations affect communities. Watch this space!
References
Castronova, E., Knowles, I., & Ross, T. L. (2015). Policy questions raised by virtual economies. Telecommunications Policy, 39(9), 787–795. Retrieved from http://www.sciencedirect.com.helicon.vuw.ac.nz/science/article/pii/S0308596114001918
Croy, L. (2015). Insurance doubt for Uber drivers. Retrieved from https://nz.lifestyle.yahoo.com/marie-claire/a/28228915/insurance-doubts-for-uber-driver/
Ernst, D., Lee, H., & Kwak, J. (2014). Standards, innovation, and latecomer economic development: Conceptual issues and policy challenges. Telecommunications Policy, 38(10), 853–862. Retrieved from http://www.sciencedirect.com.helicon.vuw.ac.nz/science/article/pii/S0308596114001359
Graef, Inge, and Wahyuningtyas, Yuli and Valcke, Peggy (2015). Assessing data access issues in online platforms. Telecommunications Policy, 39(5), 375–387. Retrieved from http://www.sciencedirect.com.helicon.vuw.ac.nz/science/article/pii/S0308596114001906
Macmurdo, M. (2015). Hold Phone! “Peer-toPeer” Ridesharing Services, Regulation, and Liability. Retrieved from http://digitalcommons.law.lsu.edu/cgi/viewcontent.cgi?article=6546&context=lalrev
NZTA (2016). P endorsement for carrying passengers. Retrieved from https://www.nzta.govt.nz/driver-licences/getting-an-endorsement/p-endorsement-for-carrying-passengers/
Pfeffer-Gillett (2016). When “Disruption” collides with accountability: Holding ride sharing services company liable for acts of their drivers Retrieved from http://scholarship.law.berkeley.edu/californialawreview/vol104/iss1/5/
