The underground economy is not ‘sharing’

It’s a busy week for politicians – who are paid with taxpayers’ dollars – to be discussing the mythical “sharing economy.” Tim Hudak plans to introduce a private member’s bill at Queen’s Park on Oct. 29 and Toronto councillors and staff are heading to the Aga Khan centre the same day for an in-depth discussion.

While the people who are paid in taxpayers’ dollars are pontificating, perhaps tax-paying businesses could get a word in edgewise: operations like Uber and AirBnB are not “sharing.” They are avoiding the taxes paid by legal, legitimate transportation and hotel industries and enjoying an enormous competitive advantage by doing so. This is not a “sharing economy”; it’s the Underground Economy. It’s not new, it’s not right, and it’s not good for Toronto or for Canada.

Take Uber as an example: every transaction conducted by Uber is processed in the Netherlands. Fortune magazine published an incredibly detailed description of how Uber avoids taxes all around the globe, describing the scheme as the “Double Dutch”:

“Let’s say that a passenger hails an Uber and takes a $100 ride across Rome... The payment goes to Uber B.V., which sends $80 back to the driver. The driver is responsible for paying his own taxes on that income. Of the $20 that’s left over, let’s say that Uber subtracts half to cover costs, leaving $10. But that’s not its taxable income. Uber B.V. will ultimately book only 1% of that initial $20 in revenue, or 20¢, as income. Uber B.V. then sends the balance of $9.80 to Uber International C.V. for the royalty… Uber International C.V. has no employees and, though it is chartered in the Netherlands, lists the address of a law firm in Bermuda as its headquarters.”

Every elected official in Canada should be required to read this Fortune article before speaking up to legitimize the Underground Economy, which Statistics Canada notes generated $42 billion in 2012 and is growing at almost the same rate as the legitimate economy.

In the first two quarters of this year, Beck Taxi, Co-op Cabs and Diamond Taxi remitted almost $2.5 million in HST for dispatch and other services.

Would passengers enjoy paying less money for their rides if we did not have to collect taxes? Undoubtedly: Uber’s lower rates are a huge part of its draw.

Are Tim Hudak or John Tory proposing that Toronto’s taxi industry be given a “tax holiday” while it competes with Uber and its Double Dutch scheme? Don’t hold your breath.

If governments wish to forgo the taxes they collect from law-abiding businesses, they need to create one level playing field for all businesses. The taxi and hotel industries would be happy to stop collecting and remitting taxes; our customers will be delighted not to pay them.

Every taxpaying business that obeys the law is subsidizing Underground businesses which pay nothing. Legitimate, tax-paying businesses are at an extreme disadvantage competing with businesses in the Underground Economy which neither pay employees nor remit taxes.

What’s more, it is an incredible slap in the face to hard-working business owners to be told by politicians who are paid with the taxes we generate, collect and remit that we must be able to compete with an Underground Economy which does none of these things.

Gail Beck-Souter is the General Manager of Beck Taxi and president of the Toronto Taxi Alliance.