It beggars belief...
"That we, as a start up, shouldn't pay an existing tax, GST"
At least they're upfront about their intent to evade taxes.
The Netherlands is the natural place for Uber to bill its Australian customers, Airbnb only lives in Ireland because it's got the best skills pool, and Bermuda is beloved of Chevron merely because it has a good maritime safety record. Those were some of the more amusing outcomes of yesterday's Australian Senate hearing into …
But (playing the ball, not the man) his argument is gorgeous - that a VAT/GST (generally one of the few parts of a tax code that is simple enough to encompass unknown future activities since at core it's "money changed hands for something not on-sold? give us a cut!") needs revision to suit his company's trading model, when that model was created with the tax code already established. He's one of the underpants gnomes and now it's the state's duty to fill in step 2
In Australia, GST is only paid by businesses that turn over about $70,000 or more. That is the law.
Most Uber drivers receive far less than that. So Uber is saying that they should not pay GST. Not unreasonable given the law.
Company tax does not really exist for domestic companies in Australia, contrary to what is often said. That is because every dollar collected in company tax becomes a "franking credit" that is available when dividends are paid to shareholders. Zero net tax. (A Paul Keating reform.) The international situation is obviously messy in both ways.
So things are not as simple as they may seem.
"GST is only paid by businesses that turn over about $70,000 or more."
First, it's $75K but that's just a technicality and doesn't really change anything. When you say 'turn over', however, that needs to be clarified because it's the 'GST turnover' that matters. The difference is that 'GST turnonver' is the turnover only from sales on which the GST is applicable. So, for example, a grocer who provides only fresh fruit and vegetables - to which GST is not applied - would have effectively $0 'GST turnover' regardless of actual turnover.
I the tax doesn't have to be paid by consumers then it doesn't have to be paid by the supplier. And that is because suppliers do not pay the tax so much as collect it from customers on behalf of the Government: it is a consumption tax.
So, with that understanding, the question with Uber drivers is simply one of whether the government requires them to collect tax from their customers on behalf of the ATO.
As above, if you supply more than $75K worth of GST-taxable goods and/or services, then you have to register for the GST and start collecting and remitting GST on your sales.
There is, however, a particularly pertinent exception to that rule, which is that:
"Under the GST law, if you carry on an enterprise and provide taxi travel services in that enterprise, you are required to be registered for GST regardless of your turnover."
There are two criteria there: "carry[ing] on an enterprise" and "provid[ing] taxi travel services".
So, the question is whether Uber drivers meet both these criteria. If so, they must register for GST and collect GST on fares "regardless of [their] turnover".
The first criterion hinges on what is considered an "enterprise"*. The exact definition is somewhat vague but one important point is that it is not equivalent to a "business". In the ATO's own words:
"Enterprise is defined widely because the GST is intended to have a broad base."
Thus, a the definition for what is an "enterprise" for GST purposes is (intentionally) broader than what may be considered a "business" under the Corporations Act and so includes activities done "in the form of a business".
What that boils down to is that if you engage in an activity that is intended to generate profit and is in any way on-going and you are not an employee, then you are "engaging in an enterprise". The last part is important because obviously, a wage-slave is not an "enterprise" and so the insistence of Uber that their drivers are not employees is of particular relevance; their decision to run that way results in the drivers satisfying the "enterprise" crtierion.
The second criterion is whether Uber drivers "provide taxi travel services" and the answer is, simply: yes. The only question there can be is whether a vehicle used for an Uber service is a "taxi" or not. The ATO have recently made this abundantly clear:
"For GST purposes, the word taxi takes on its broad ordinary meaning of a car (vehicle) made available for public hire that is used to transport passengers for fares."
There is no room in the English langauge to exclude Uber drivers from falling under that definition, save if they operated via bicycle (relevant as rickshaws are not covered). But, to be even clearer, they have provided a parallel definiton of 'ride-sourcing' - the semantic argument used by Uber to try and get around this:
"Ride-sourcing is an ongoing arrangement where:
- you (a driver) make a car available for public hire
- a passenger uses, for example, a website or smart phone app provided by a third party (facilitator) to request a ride
- you use the car to transport the passenger for payment (a fare) with a view to profit."
That's all very long-winded but I wanted to be thorough as many people seem not to understand this and thus argue along the lines that Uber is being targetted and drivers taxed, which is not really the case.
So, we then come to a question that may have occured to some people: why must taxi drivers collect GST regardless of turnover? The ATO have answered this question directly and the summary is: to avoid problems that would arise from inconsistency, where one taxi ride is subject to GST and another is not.
That reasoning can easily be applied to Uber, specifically the following explanation for the exclusion (for all taxi drivers):
"Meter rates are set by each state authority and after after 1 July 2000 all meters were adjusted to reflect the GST. If some drivers were registered and others were not, all would be collecting the higher rate. This would disadvantage drivers who had to be registered if the ordinary registration turnover threshold applied."
In other words, taxi fares have GST built in and this is set by the states, rather than the taxi dispatch operators or individual drivers. Thus they are collecting GST from passengers regardless of their GST-eligible turnover and so if a driver earning less than $75K didn't have to register and remit GST, that driver would earn 10% more on every fare than a driver who was over the threshold.
It's about providing a level playing field for all 'enterprises' operating taxi services and that is how and why the original law was written that way long before Uber existed.
* - An "enterprise" is tautologically defined as any entity carrying on an enterprise so the terms can be considered synonymous for this purpose.
As a side note on why the law requires all taxi drivers to register regardless of turnover, I suspect that a major reason is that the Government actually wanted to be able to collect that money.
First, it was decided that taxi services should be subject to the GST, in keeping with the goal for it to be a broad tax replacing many other sales and services taxes.
That decision being made, the tax actually needed to be collected for there to be any point and I am sure that that it was well understood that the vast majority of drivers would fall under the threshold, meaning they wouldn't have to register, would have to collect and thus there would be next-to no tax revenue from an entire sector, simply based on the way it is organised.
Unlike most other industries, there aren't really any large players* - the market is almost 100% serviced by individual owner-drivers. It's not like, say, running a small corner store that turns-over $50K. In that market, the vast majority of supply is conducted by businesses that exceed the threshold and thus must collect GST. Excluding the small operators does very little to impact tax revenue - in direct contrast with the taxi industry which is almost entirely small operators under the threshold.
Of course, that's just my own interpretation but it's a logical step and we can take it one further by looking at Uber.
What happens to the GST revenue if Uber reduces the use of taxis in favour of 'ride sharing' services? Easy: it goes down. If you have a hundred trips and 50 of them are made using a service that doesn't have to register and remit GST then you have just lost 50% or the GST revenue from the supply of that service.
* - Something glossed-over or misunderstood by Uber supporters, as they misconstrue or misrepresent the big dispatch operators as the target of the 'disruption'.
Interesting - but is a driver who, for instance, accepts a fare each way on their regular commute acting as an enterprise?
I'm not entirely convinced that they are - it's just a dynamic, and large, car pooling service.
Obviously if you are just driving around all day grabbing fares then you are operating as an enterprise...
How far out of your way do you have to go to become a taxi rather than a car share?
"Interesting - but is a driver who, for instance, accepts a fare each way on their regular commute acting as an enterprise?"
Indeed. Or, at least I find it interesting.
The exact rules are not clear cut and if you look at the history of private rulings published by the tax Commissioner, you will see some that address the question of whether an entity can be said to be "carrying on an enterprise" or not.
Of interest (at least to me) is that some of those cases are where an entity is trying to avoid paying GST because they believe that the supply was not made while engaged in an enterprise while others are around entities attempting to claim credits by saying that the GST costs were incurred as part of carrying on an enterprise. So it goes both ways.
To the specific case of 'car pooling', the ATO does make some specific mention of these systems, with reference to 'chipping in for petrol'.
Here, I think you raise a key point when you say "on their regular commute acting as an enterprise". The most important thing is that the service is whether the service is provided in furtherance of an enterprise in exchange for 'consideration'. It should be noted that it need not be the primary enterprise*.
If the goal is to help cover your commuting cost then my instinct would be that such an arrangement would not qualify, so long as the trip would have been made regardless of any paying passenger.
An Uber driver is not going to be making that trip otherwise because they are available for public hire, to go wherever the customer wishes. They may be able to pick-and-choose but that isn't, in my view, sufficient differentiation as a taxi driver may also choose not to go to a job boradcast over the radio.
In the end, though, with Uber I don't think it matters because Uber set the price of the fares, not the driver. Because of that they can't really raise the price by 10% but only when your driver qualifies for registering for the GST.
"If the goal is to help cover your commuting cost then my instinct would be that such an arrangement would not qualify, so long as the trip would have been made regardless of any paying passenger."
That was the case I was putting forward. But I can't quite work out how you would decide where that case stops...
Presumably where your petrol & wear costs are more than covered?
It's not necessarily clear cut and that is why the Commissioner needs to makes rulings on just these types of questions.
Whatever the case, however, being an Uber driver shouldn't qualify for whatever exceptions might be allowed for car-pooling and truly ad-hoc situations.
Again it is just my instinct, but I would suggest that the very act of signing up as an Uber driver and what that involves* would count as strong evidence that your accepting payment for accepting public hire requests is entirely within the course of your activities as an enterprise and aimed at making profit by engaging in those activities.
* - Here, again, Uber are the best source of information about how they should be judged because they stress how rigorous the process is to be accepted as an Uber driver. Some have refuted those claims but Uber themselves suggest that it takes time and effort to become an Uber driver and, to me, would count against the assertion that Uber drivers are not engaging in an enterprise.
Adding to the very helpful comment you made, whilst you've discussed in detail the liability of drivers to GST, you haven't really touched on the liability of Uber as a ride intermediary.
I suspect that Uber are trying to argue that they are an intermediary/broker and hence they are merely acting as a 'dating agency' hence are not in the ride business at all!
I also suspect they are wanting to use a tax avoidance trick used by UK supermarkets, where your receipt may show a "payment processing fee".
"As I understand from the very broad definition, If you're getting paid, it's an enterprise. If you're not getting paid, it's a car share."
I don't think it unreasonable to expect some remuneration towards petrol & wear and tear (as defined by your government's own tax office).
Car sharing without is fine if you drive half the time, and I drive the other half, but if you always do the driving then I'm not contributing appropriately to the arrangement - paying 50% of the relevant milage rate seems fair to me - and probably good for you as well.
Carry two people to work (which I could easily have done at a previous job and you can either cut the costs in 3, or maybe everyone you carry is happy to put in 50% - in which case your own commute is free.
> Unlike most other industries, there aren't really any large players* - the market is almost 100% serviced by individual owner-drivers.
Sadly most taxi license plates are not owned by the driver, because they cost between $350,000 - $500,000 although the value has been declining since the entry of Uber. A taxi driver working for the owner typically receives 50% of the fare and the owner receives the other 50%.
There is zero reason that the right to operate a taxi should cost more than the fees required to regulate the industry and provide training. The cost of the taxi license plates drives up the cost of fares because the owner wants to make a reasonable return on their investment.
Sorry - I meant owner-operators. I used both 'operators' and 'drivers' several times through my posts and got them mixed up that time.
That said, many of those owners share the driving duties with someone else but, even so, the truth is that some 90% of taxi licenses - in Sydney at least - are owned by someone who only owns that one single license.
"There is zero reason that the right to operate a taxi should cost more than the fees required to regulate the industry and provide training. The cost of the taxi license plates drives up the cost of fares because the owner wants to make a reasonable return on their investment."
No and almost. In that order.
No to "there is zero reason" because there is every reason. Why? Licenses are limited and so when you talk about how much a taxi license "costs", that is the cost not to buy a new license from the Government (though they do release new licenses occasionally) but the cost to buy one at auction from an existing owner. The price you see is commonly referred to as the 'transfer cost' or 'transfer value' and it has more in common with buying a home than it does with buying (say) a new car.
Now, if you say that licenses shouldn't be limited to X number then that is something rather different but as it stands, with he regulations as they are, the "reason" taxi licenses are expensive is simple: supply and demand.
To the second sentence, you are correct in saying that the desire for investment return is an issue but it's not entirely accurate that it drives up fares because the state governments set the fares, not the owners.
Of course, that price has to be responsive to the industry so there is an indirect influence but I am not sure I would go so far as to say that it drives prices up. It would be more correct to say that this drives bailee drivers' income down and that it drives owner-drivers' income down as they spend more of their income servicing the loan the took to purchase the license.
<quote>Sadly most taxi license plates are not owned by the driver, because they cost between $350,000 - $500,000 although the value has been declining since the entry of Uber. A taxi driver working for the owner typically receives 50% of the fare and the owner receives the other 50%.</quote>
Sadly, in many areas of the USofA, that (the section in italics) is not true. In my local area, those drivers actually lease the cab from the owner; and must fork out the daily lease payment before they make ANY money. A slow day may end up actually costing the driver money when you take into consideration the lease payment and gas.
Since the cab owner gets a fixed revenue from the daily leases, they have no incentive to use fuel efficient vehicles, and often purchase retired (gas guzzling) police vehicles at auction.
Then again, there are exceptions, like the one owner-operator who bought a used Toyota Prius and put it out on the street as a cab. He most certainly likes the 40+ MPG he gets out of it, when they typical Crown Vic ex-cop car struggles to get 10 MPG. But, then again he is an exception to the typical cab operator.
the owner wants to make a reasonable return on their investment."
Whatever the outcome, Uber is certainly shaking up the industry though. That may mean that some people will learn the hard way that "the value of your investment may go down as well as up" and that putting money into something and expecting to sit back and take 50% of the profits might not be a long term sustainable model. If the licence plates decline in value enough, maybe taxiing can go back to the intended owner/driver model.
Excellent summary, *except* for the quote from the ATO: "to avoid problems that would arise from inconsistency, where one taxi ride is subject to GST and another is not". This is circular reasoning: what they are saying is that "we screwed up setting meter rates, so we changed the regulations to match". In any other enterprise (say, the plumbing trade), this nonsense doesn't apply.
I love your typical Australian Office of Legal Drafting (OLD) "definition" of Enterprise.
The OLD "definition" for Enterprise can best be thought of using the probable OLD "definition" of CAT - a cat is an animal that looks like a cat, moves like a cat, feeds like a cat and makes noises like a cat. A totally meaningless definition unless first you know what a cat is.
Quite simply Uber are claiming that they do not understand what a "cat" is on the grounds that the "definition" is whatever you decide to "think" it to be at any point in time.
Note that Definition is in quotes above because the OLD says that the Macquarie dictionary definition of definition is not the same as the rest of the worlds definition of definition which is why in the rest of the world Part 1 of the Civil Aviation Regulations/Rules is Definitions but in Australia it was Interpretations until the minister intervened - and even then OLD refused to use Definitions and settled for Dictionary - even though they were instructed by parliament to harmonize with the US FARs where part 1 is Definitions. This clearly indicates why the Australian aviation legislation is so totally out of step with the American and European legislation.
In the rest of the world "harmonized" regulations leads to the USA, Europe and almost every country except Australia using exactly the same single definition of Aerodrome/Airport. Last time I looked Australia had six definitions for Aerodrome and not one of those harmonized with, or were as clear as, the rest of the worlds standard.
Then again, in their opinion, the OLD's crowning glory was the 144 page (English language only - not multilingual) document detailing how to fill in the two page GST statement form.
No, it's correct.
Above $75000 you pay the GST on all your outputs. End of story.
Below $75000 you pay the GST on ALL your inputs ... with no opportunity to claim GST credits and backbill them.
For mine ... the average Uber driver would be better off registered (in a credits sense) - especially when starting out - as he could claim back GST credits on the car, repairs to same, fuel, maintenance and other running costs - reducing his expenses by 10%. As his customers would be responsible for paying the GST, he'd be better off (aside from the need to collect and remit the tax to the ATO).
All the above said, that would introduce a level of accounting complexity that the average driver may not be interested in ... but surely Uber could build this in to their service to the driver.
"No, it's correct."
If you are referring to my response to @Fludge's comments then perhaps I misunderstood him. He said:
"Your message is wrong. Anyone who sells something, whether it is an object or a service, must pay GST on the transaction."
I took that to mean that they must pay GST on the sale/supply. I.e. if I am a shop owner and sell carrot to someone, I must pay GST to the government. And that is not true at all. Sure, I may have to pay GST in the form of higher prices when I pay rent or but cash registers or hire someone to paint the shop, but that's not how I interpreted the comment.
On that note, however, you say:
"For mine ... the average Uber driver would be better off registered (in a credits sense) - especially when starting out - as he could claim back GST credits on the car, repairs to same, fuel, maintenance and other running costs - reducing his expenses by 10%. As his customers would be responsible for paying the GST, he'd be better off (aside from the need to collect and remit the tax to the ATO)."
And you have an perfectly valid point there and the ATO agrees! There are two main reasons listed for why the definition of "carrying on an enterprise" is so broad. The first, as already mentioned, is that the GST is designed to be a broad tax. The second, however, is in line with your suggestion, as follows:
"Activities done by particular entities are included in the definition of enterprise so that those entities can become registered for ABN and GST purposes and to potentially allow them to obtain input tax credits"
Additionally, and even more closely matching what you say, in their advice for when you must register for GST, the ATO says that you need to register if you wish to "claim fuel tax credits for your business or enterprise."
As I said in another post, the broad definition of 'enterprise' can cut both ways - in some instances allowing an entity to claim credits but in another instance, requiring them to collect and remit GST. In most cases, it's both as the requirements come bundled with the allowances.
So Über drivers don't pay GST on the money they receive from Über. I'm fine with that. [edit after reading comments below, I'm not fine with that because there is a $0 registration threshold on taxi drivers] However Über themselves should pay GST on the money they receive, you can argue whether that is the full amount of the fare or their 25% commission, but they should be paying something.
.... not just Australia. Just because Uber Australia is broke doesn't mean that this was testimony in the Australian Senate. It could have been the US, the EU, the Netherlands, who knows. Plenty of politicians all over have been investigating Uber.
I personally thought it was in the US since this has come up more than once, specifically discussions during US Senate hearings about Starbucks evading taxes in the UK. The article never made it clear which Senate this was.
The companies are just doing what they are legally allowed to do. If you want to stop them then stop them. As users don't use them and as government change the rules to stop the tax avoidance. But will they I bet not some lobbyist will visit anyone pushing to make a change and things will carry on as they are. Australia has been barking at this for years and done nothing so one can only take it that they bark each time the personal coffer gets low and needs a top up.
If this was really about the Australia public interest then the laws would have changed by now or at least a draft in for reading.
I think that's part of the question. Are they playing by the rules? Being hauled before a legislative body to discuss why you think your current behavior is okay is usually done for two reasons: You've done something wrong and they want to grandstand a bit, or you've violated the spirit of a rule but technically, you are right.
The former is generally done to score political points with the constituents back home, but the latter is typically a shot across the bow to either stop violating the spirit of the rules, or be prepared to face the consequences. My guess is that like their American counterparts, these senators are giving Uber, Airbnb, Chevron, etc., a warning that the should become good corporate citizens without legislative action, or the legislative action won't be nearly as friendly.
Upvotes for both of you.
I think the first, important step on this path was the ATO clarifying that 'ride sharing' services were, for the purposes of GST, are 'taxi services' and thus the drivers, unless they are employees - which Uber vehemently argues they are not - are required to register and collect GST.
Importantly, that's not actually a change of the law, it's simply a clarification about the common language of the existing law.
" these senators are giving Uber, Airbnb, Chevron, etc., a warning that the should become good corporate citizens without legislative action, or the legislative action won't be nearly as friendly."
Given that Uber has given up on UberPop in the Netherlands after 40-ish arrests of individual drivers, two raids by an interesting collection of government agencies, and racking up something like €750.000 in fines ( in a country where corporate fines are so low they're considered operational hazards, no less..) , maybe "shooting across the bow" should be done a bit more...convincingly?
Because, y'know, the service they provide has been deemed illegal in the country they've decided to be registrated in... Maybe some translation of Dutch court proceedings and news articles into english would benefit the Pollitickians there inOz..
So, you are all for foreign companies coming into $YourCountry, setting up shop, and paying absolutely no tax on their operation?
Don't get me wrong, I'm all for Uber shaking up incumbents, as long as they are playing on a level field.
The minute they start doing dodgy taxation practices, or claiming tax shouldn't apply to them because they're a startup, or that their drivers aren't required to undergo the same safety and background checks as normal taxis, or carry the same level of liability insurance, is when I tell them to get fucked.
The laws were here for them to comply with, before they even got into this country. For them to flagrantly ignore it, and claim special treatment for something they do not deserve, is the precise moment I tell them to fuck off.
> So, you are all for foreign companies coming into $YourCountry, setting up shop, and paying absolutely no tax on their operation?
If that's the law, and you don't like it, change the law. Blaming companies for doing what the law allows is both futile and foolish.
Tax is theft, or at least "demanding money with menaces", but the law says the government - and nobody else - is allowed to do that. ("Demanding money with menaces" is a specific UK crime, I expect other countries have something similar.)
Quite right, tax laws do need tightening up to eliminate this sort of behaviour, but it's going to require tremendous international cooperation to do it properly. It's not within the power of an individual government to fix, more's the pity.
"Tax is theft"
No, it isn't.
@ Lamont Cranston
"Tax is theft"
No, it isn't.
Actually yes it is. Do we choose to give money to the government or is it taken from the people? If you dont pay then the tax collector and any hired henchmen will come down on you with threats to your liberty, freedom, well-being and possessions.
If you dont think tax is theft then dont pay it for a little while and see if the gov will let you keep it or if they will take it from you.
See here. Don't know what it's like in the rest of the world, but I'd imagine it's much the same. Withholding my tax contribution would more accurately meet the definition of theft, than government taxation does.
Having read your reply to dan1980, I'm slightly worried that you might actually be serious.
See here. Don't know what it's like in the rest of the world, but I'd imagine it's much the same. Withholding my tax contribution would more accurately meet the definition of theft, than government taxation does.
Back in the 1960s when I first started work here in the Land of Under, the annual taxation return stated that it was a "taxation and superannuation" return. Then, a few decades ago, the government realised that it had spent our superannuation on other shit, so they introduced compulsory superannuation in addition to taxation. IOW they had pocketed Australian taxpayers superannuation funds.
Some of the contracts I worked were for NGOs who insisted that part of my income be paid into their preferred super fund and I ended up having money in several. However, since these were small contracts, the amount was insufficient for the interest to cover the requisite service fees, so the amount held decreased over time. I eventually managed to have them all consolidated into one fund, but not before losing a significant percentage of what I had paid in.
But I count myself lucky. I have a neighbour who worked for the same company for many years. Upon his retirement, the super fund he had been required to pay into went titsup. He never received a cent.
Do we choose to give money to the government or is it taken from the people? If you dont pay then the tax collector and any hired henchmen will come down on you with threats to your liberty, freedom, well-being and possessions.
If you dont think tax is theft then dont pay it for a little while and see if the gov will let you keep it or if they will take it from you.
Spent most of my life self-employed. The games the ATO play confirm the claim that "taxation is theft". Example:
My last year of business was the last year of the pre-GST regime change. The ATO sent me a provisional tax bill for ~90% of my anticipated coming year's income. I lodged a complaint, but the ATO insisted it was up to me to earn sufficient money to pay the bill. I paid as much as I could afford and for a year, once a month received a notice requiring me to pay the outstanding amount plus interest.
When I lodged my tax return, I had earned less than the ATO's estimate and they refunded a portion of the provisional tax I had paid. They did not refund the interest they had charged me on the amount I had never really owed them! Fucking thieves!
Technically we choose to give money to the government because we vote for a government that wants to collect tax to spend money on things. A candidate that promised to completely shut down the government and stop collecting tax probably wouldn't get very many votes. People do want the government to spend money on some things, the argument is about how much, and on what.
Technically we choose to give money to the government because we vote for a government that wants to collect tax to spend money on things.
My father was paid compensation by the German government as he had been a slave labourer under that country's National Socialist government. The payment was made on the proviso that it not be assessed for income tax purposes. The Australian government took a different view and made my father pay income tax on the compensation payments.
I suppose "technically" had he not paid the ATO that money he would be deemed by some commentards here today that he was "stealing" from the government.
We risk being seriously diverted from the topic but what is the point of all this if not to discuss and debate with one another?
I would say that there are only two ways that one could consider tax to be "theft".
The first is on legal grounds. This is, obviously a non-starter as it is illegal not to pay your taxes (as you note). You might complain the law is unfair but that does not make it void and inapplicable. The constitutions of both Australia and the United States - as upheld by the High and Supreme courts respectively, specifically authorise the government to levy and collect taxes. That is the end of that argument - collecting taxation is not theft from a legal perspective because the Government is explicitly authorised to do so by the highest law in the land, as affirmed by the highest court in the land. End of story.
So, given that taxation cannot be considered theft on legal grounds, on what other grounds can one argue? The answer is: moral grounds, and this is where the debate becomes more interesting because the moral argument actually allows debate where the legal one does not.
So what, then, is the moral grounds for asserting that taxation is theft?
The only argument that I can see to have any merit at all is that a person is (morally) entitled to their wage in the amount that the job pays. That may seem reasonable but there is an underlying assumption hiding just below the surface that must be understood, which is that the amount of money people earn is the same as what they deserve.
The one is implicit in the other - if you have a moral right to $X then getting less than $X is being shortchanged and, morally, wrong. And that argument just cannot hold up because it assumes that each and every person has some value that should be recognised in the form of payment of a specific, morally-justified amount.
So, the unavoidable, logical premise necessary to go from there to the conclusion that "tax is theft" is that everyone is, somehow, paid exactly what they are morally entitled to and neither a penny more nor less.
Now, you may well assert that but there is no way for you to prove it and so I might just as easily assert that that is not the case, thus leaving us with only the legal argument available to in any way settle the issue.
And, legally, tax is not theft.
The constitutions of both Australia and the United States - as upheld by the High and Supreme courts respectively, specifically authorise the government to levy and collect taxes.
However, the government is not authorised to levy tax on all income. It is widely recognised that certain income is not taxable; compensation paid by an insurance company for injury for example. It is certainly the case that the compensation paid to Germany's slave labourers is not in any reasonable sense:
salary and wages, interest from bank accounts, dividends and other income from investments, bonuses and overtime an employee receives, commission a salesperson receives, pensions, or rent.
which is what the ATO defines as taxable income.
From the 1890s to the 1970s the Queensland Government managed the wages and savings of Aboriginal and Torres Strait Islander Queenslanders since they were considerd incapable of managing their own finances. A small portion of their wages were given to them and the remainder deposited in a bank account. Often, Indigenous people didn't know what was happening to their money. Unlike the rest of the community, many had no control over their own money, thier earnings being spent for them by the government employee betters.
Government officials took money out of these accounts to pay for things like clothing, travel fares, postage, medical and dental expenses and purchase orders for workers or their families. Indigenous workers were generally not told about this. Despite the aborigines receiving far less than their earnings, the Queensland government (and their employees no doubt) found plenty of use for the "excess" income.
During the period 1975-1986 aborigines working for the Queensland government were paid less than the legal award. Amazing isn't it that a private business doing that would have been breaking the law!
It's all very well saying that government stealing is OK because it's legal, but that does not mean it isn't theft.
"We risk being seriously diverted from the topic but what is the point of all this if not to discuss and debate with one another?"
I am happy to discuss as long as you dont mind. It is interesting to hear another perspective on the same issue. And you make it very interesting by boiling it down to 2 options- morals and legality.
I dont believe in morals in an absolute sense. Morals are very flexible, very fluid and can easily be manipulated. Morals do not stand still nor are they the same for people living together never mind over large populations. Almost anything can be justified and when an argument falls to morals it risks lacking good reason.
So of your 2 options I find legality to be the easiest and most amusing. Who sets the law? What is this creator of the law? It is the 'might is right' rule where the law of the land comes from the ones with the power to apply it (physical might). The UK is fairly stable but we have seen the relevance of law in the middle east where you pay your dues to the one in charge that day. The mafia made their own laws and while this country is pretty civil this rule still stands.
Someone above put up a link over the definition of theft. The only thing defining tax as different from stealing is the legality issue which as I point out law is might. Simply stealing is ok as long as nobody has the might to challenge it. Not a bad definition if your in charge.
As far as checks and balances of law being the highest law of the land, it doesnt exist. As recently proven over the developed world the idea of courts being in charge has been challenged by the immediate threat of terrorism where freedom and liberty have been pushed aside for militarised operations against populations all at a higher cost (to the tax payer of course). Recently the HMRC in the UK has the right to take the money before you have the opportunity to prove they are (as is often the case) wrong. The above experiences of Pompous Git sounding very theft like but for the only defence of legality.
It sounds a lot like saying- it looks like a duck, it walks like a duck, it quacks like a duck, but for just this one special case we will call it a turtle.
I'm not really sure why you're being downvoted here. Goes with the territory, I suppose.
As you say, morals are flexible and fluid so appealing to them does not really get us any closer to agreement.
We both agree that this leaves us with the legal argument.
It is simply a fact that, at least in Australia and the US, our constitutions explicitly grant the Government the power to levy and collect taxes, but you ask:
"Who sets the law? What is this creator of the law? It is the 'might is right' rule where the law of the land comes from the ones with the power to apply it (physical might)."
These are important questions, but irrelevant to the primary question of legality because they are going back to moral issues. Essentially, you are asking: what is the basis for law in the first place? This is a deep question to be sure, but doesn't impact the determination of whether "tax is theft" or not.
You might counter that if there is no proper basis for the law then it is not really a law. Well and good, but if so then what is the basis for any law? And if there is no basis for any law then how can anything be considered to be "theft"?
That is the crux of the issue because saying that "tax is theft" is logically impossible. If you accept the legal framework then tax cannot be theft because it is authorised by law. But if you reject the legal framework then "theft" itself ceases to have any legally-defined meaning and so you are right back at arguing about morals.
Now, I accept that the situation in the UK is different from that in the US and Australia as you don't have a codified 'constitution' as we do. As a much older country, you instead have the built-up legal traditions and conventions that have been accumulated and refined over the centuries that play something of the same role.
But the fundamental logical problem remains: either you accept those conventions or you don't. You can choose to accept some and not others, thus accept the laws on theft but not on taxation but you do so based on your personal moral and philosophical arguments rather than legal ones.
"I'm not really sure why you're being downvoted here. Goes with the territory, I suppose."
Np, up votes or not it is the discussion which contributes. And I am enjoying this discussion.
As for the tax vs theft, I guess you could look at it from a moral point of view (which as we agree is a poor argument) but also from an action point of view. It is exactly the same action with the same consequences but treated differently. Essentially it is ok for one to do it but not anybody else. With the increasing move to enhanced stealing or more efficient stealing by expanding the rules to include not only tax evasion but also the legal practice of avoidance making the perfectly legal and intentional right to not give more than is due illegal. The law seems to be becoming as flexible as morals (especially as they become more reactionary and emotional) which sounds like a regression to a time before greater democracy and equal rights.
As it happens, I do not accept that looking at the issue from a moral viewpoint is a poor argument. There are two alternative premisses here: either you accept the belief that you have inalienable property right in your self, or The State has an inalienable property right in your self. The former premise is freedom and the latter slavery. If you accept the premise that you possess the right to your body and the fruits of its labours, then taxation, forcible removal of your property, is theft. If the latter, then The State has the right to go even so far as to determine the "proper" amount of revenue raising its slaves engage in as in the example I gave where the ATO forced me to pay interest on money I owed them even though they and I knew I would never earn the amount they had determined.
[aside] The chief reason I had decided to wind up my business was in order to build my dream home. It cost me ~$AU170,000 and will shortly be put on the market for ~$AU490,000. Only 50% of capital gains are taxed here in the Land of Under, thus I would pay ever so much less tax than I would have earning $AU320,000. But since it is my principle place of residence I don't even have to pay capital gains tax. Had I earned the money to build to the original builder's quote and borrowed from the bank the I would also have needed to pay income tax and bank interest. It's a great system if you can accumulate sufficient capital and understand how the economy works. Not so great for wage-slaves.
I miss being born English working class like I'd miss an extra hole in my head. [/aside]
@ Pompous Git
"As it happens, I do not accept that looking at the issue from a moral viewpoint is a poor argument."
I know not everyone agrees and some people feel really upset when I suggest that morals are incredibly flexible. I dont disagree with anything you just said about where you feel the rights are but throughout history people have changed that opinion (morals) on the flimsiest of reasoning or the promise of a utopia. If the people could have foreseen the disaster of communism for example (especially in places like china and N Korea) would people have willingly gone along with it knowing their descendants would be left to die to allow the leaders luxury?
Right now we have the same moral problems where companies are being blamed for legally not paying over the odds in tax, so the gov is doing their best to ruin their reputation and gain support for sweeping new powers of taxation. The best part is the people dont realise they are voting for more tax on themselves and less jobs- two things they demand. Just as they demand both freedom and absolute security, so freedom has been removed to improve security but people still morally believe they are right no matter how much harm they self inflict.
Worryingly people assume they are moral when they demand more tax, but only on people richer (or doing other things) to them. People can morally argue that tax is a good or a bad thing, and thats a discussion nobody can win as it is subjective. But as for as the action goes both stealing and taxation is exactly the same thing. It is just the name that is different.
"Tax is theft."
Only as much as driving down the road is trespassing, which is to say not at all.
I wish I had to pay less tax and I really wish that my money didn't get wasted the way it does but I pay my taxes and willingly as anyone can - and I mean that because I believe very strongly that we should all contribute to help everyone out because there's enough to go around.
I am fit and healthy and will never have children but I do not begrudge my money being used to pay for health care are education, in fact I wish more of it was. I wish it was spent a little more wisely and with more of a concern to the fact that this money being spent by government is not 'government money' but money that the citizens have given so that it can be used to improve the well-being of the country as a whole.
Further, the idea that taxes are 'theft' ignores a very simple truth: that, but for many services and elements of infrastructure that tax dollars provide, many of us would be able to earn the money upon which our taxes are calculated.
In that way, you can almost think of taxes as the repayment of a loan - if you drove to work, for example, you most likey used a few public roads which wouldn't be there but for taxes. But it extends far beyond that because services provided by tax dollars underpin a great deal of our society whether we understand it or not.
Taxes are us paying out share of what it costs to run the society we all live in.
And if you think you made all your money 100% on your own then perhaps consider the position you would be in if there was no police force and no public justice system. Or public schools. Now, maybe you went to a private school but that school would have received money (they all now) anyway. More subtly, private school fees are moderated by the fact that one can use a public school instead. What do you think school fees would be if there were not public schools?
The result would be you going to a less-accomplished school which may have resulting in worse grades and reduce university prospects.
Maybe your family were wealthy enough to have paid whatever it took to give you a first-class education - luck for you - but in your enterprise you now have to hire people so you want a pool of intelligent, skilled workers - something made easier by tax-funded education. Likewise, you will earn more the less your frequently your staff are unwell, thus benefiting from whatever tax-funded Healthcare is available.
In short, if you wish to consider tax to be "theft" then so is utilisation of any tax-funded service.
(Apologies for spelling/grammar as I am so tired I literally am having trouble keeping my eyes open. d.)
"Only as much as driving down the road is trespassing, which is to say not at all."
I was going to leave it with my last comment on tax but this really made me cringe. Public road with the express purpose of public being able to transport themselves around. Removing a privately owned road from its owner so it can now only be used by an exclusive group for their purposes under the threat of force is the nearest a road analogy seems to work.
"I wish I had to pay less tax and I really wish that my money didn't get wasted the way it does but I pay my taxes and willingly as anyone can"
As anyone can? its either willingly or not. If not why do you pay it? Is it because of a threat of force being used against you? Yup. And while they waste it what can you do about it?
"Further, the idea that taxes are 'theft' ignores a very simple truth: that, but for many services and elements of infrastructure that tax dollars provide, many of us would be able to earn the money upon which our taxes are calculated."
Which is fine justification for stealing but this does not invalidate the theft argument, it just appends a 'robin hood' view to it. The problem with such robin hood views is they are easy to apply to spend more money but people ignore the real world effects of stealing more to provide more, moving from necessity to bribe. While an amount of public services is beneficial this mark has been left in the dust and the idea used as a stick against anyone wanting to remain at a balanced point (i.e. people always want more for less).
"In that way, you can almost think of taxes as the repayment of a loan"
Very twisted. They take money off the people to provide ever reducing services via monopolies with extreme variations of quality to which we are paying back purely for the pleasure of being alive. We are being taxed for being alive. That is it. The state takes from us because we were born so they dont have to earn it, they are a huge welfare dependant! That is why it smarts when they submit claims for duckhouses, moats and porn on our earnings.
"Taxes are us paying out share of what it costs to run the society we all live in."
To a point this is right and a good justification of public services. But beyond that point it is taking to prop up whatever daft idea the gov wants to spend on. Often increasing their fiefdoms and so their power to command more money (and as such demand).
"In short, if you wish to consider tax to be "theft" then so is utilisation of any tax-funded service."
How then can we avoid the public system? Hmm. The gov have their hand in all water supplies, energy, education etc. On top of that if you dont provide these government sanctioned services to your child you are automatically attacked by said monopoly government as unfit and the child removed so they are forced to use such services. Quite a racket based on your loan comment.
"I'm all for [Uber] shaking up incumbents, as long as they are playing on a level field."
Them or anyone else. Uber is a taxi-booking company. So they use technology to enable their business? So what? Banks, financial services, insurance, countless other industries use innovative technology to enable their business. That doesn't make them technology companies. Asking for an exemption in this respect is taking the piss.
As to the profit being exported to Netherlands, i don't see that either. Punters are not paying X to the cab driver for the ride and Y to Uber Netherlands for a booking fee, they pay X+Y to Uber Australia who then passes on X to the driver. Under what criteria does Uber Aus pass on Y to Uber Netherlands, if it's not profit-exporting for tax avoidance purposes. It might be technically legal but it's a legal loophole that needs to be slammed shut, and if Uber*'s fingers get caught in the door, tough luck.
*substitute Starbucks, Chevron, Amazon etc as required
For all the pixels I have taken up blathering on about GST and dry regulations, I think you may have summed-up my exact position far more succinctly than I ever could.
I am 100% with you in that I have no problem with Uber as a service and I think there is a definite need for more taxi services and a richer variety of ways for people to engage these services.
Personally, I don't use Uber and never have. Part of that is because I don't have a smart phone so it's a non-starter for me, but I also do not want to support people who are, in my view flounting the laws and regulations and so competing unfairly and operating at a higher risk.
This is the same reason I don't use unlicensed tradespeople and if I needed to use a freight transport service, I wouldn't select one that offered a cheaper price by breaking weight-limits on their vehicles.
The argument, they they are not a taxi company, they are a technology company is complete tosh. They are a taxi dispatcher that happens to use computers to dispatch the cars.
I guess Amazon isn't a retailer, because, you know, they use computers to sell things... But there again, so do most shops these days, as do many taxi companies.
Here in Germany, they are acting illegally, or at least encouraging their drivers to do so. In Germany you need insurance to drive a car. If you are using it commercially (private hire), you need a professional driving licence, if you don't have that, you can't get insurance for driving commercially - just your private insurance, which covers driving to your permanent place of work, plus private driving.
But most Uber drivers don't have the relevant driving licence (which is very different to a taxi medallion in the USA, this is purely the type of driving licence), which means they are driving on private insureance, which in turn means:
1) if they have an accident, the insurance won't pay, so they will be personally liable for all damages
2) if they have an accident, they will be prosecuted for driving without insurance
3) if they are stopped by the police, they will receive a fine and possibly lose their licence
But Uber claims this isn't their problem, because they are a startup and they are shaking up the industry!
While I agree with your post, you're actually chasing after their red-herring.
It doesn't matter at all whether Uber is a 'taxi company' or a 'technology company', nor whether they dispatch taxis or or not, nor whether they use computers and 'apps' or radios and meters.
That's because it's not really about Uber Australia the company or Uber in the Netherlands or how they are shunting funds back and forward. In some respects they could operate entirely from overseas as there is no need to provide any services to drivers or customers locally.
What it's really about is the Uber drivers.
THEY are the ones actually providing the service to the consumer and, as that service is taxable under the GST, they are the ones who are required - by law - to collect that 10% and then remit it to the ATO.
That is the heart of the issue here and most everything else it just distraction. The reason is that GST is a consumption tax borne by the consumer and so is levied on the cost of the sale to the consumer. It has nothing to do with the revenue or anything else: if a taxable sale is made for $55 then $5 of that is GST that is paid by the consumer for the sole purpose of it going to the Government. That $5 is not there for the Uber driver to keep.
So what Uber as a company actually is and whatever semantic somersaults they pull are absolutely irrelevant to GST. GST is a tax on the consumer at the point of purchase so all that matters is the service that the consumer is paying to be supplied with.
Uber passengers are paying for a service offered and used and consumed in Australia and that service is provided by an entity (the driver) in Australia who is engaged in activities done "in the form of a business".
The back-end technicalities of what is involved, end-to-end, in providing that service has no bearing on that because the service being paid for by the consumer - the passenger - is to be driven from one location to another location by someone in a vehicle provided for public hire for a fee and.
Why does Uber care if their drivers have to register for the GST?
First, it identifies them and so makes it far easier to deal with driver if it is ruled that they are breaking state taxi regulations. Second, and this is perhaps the bigger one, it means that Uber will have to pay their drivers more, which means either taking a smaller cut for themselves or raising the fares, which will remove some of their competitive edge.
In essence, Uber drivers (in Australia) have been supplementing their earnings by pocketing the GST that should, by law, be remitted to the government. Thus they are able to accept a lower base payment. Remitting that GST collected to the ATO means that they must re-evaluate their earnings and may find that driver an Uber car is no longer feasible unless prices are raised.
@nijam but Uber are using these drivers, without checking the drivers are legally allowed to transport passengers. That is their problem, because they are putting their reputation and the lives and welfare of their customers at risk.
If you are injured in a crash and the Uber driver is not insured, he files bankruptcy and you can pay for your own medical expenses and compensate yourself for loss of income... It isn't Uber's problem, according to you.
> Play by the law of the land, or get the fuck out.
The whole point of this (Australian) Senate hearing is to debate whether or not they are "playing by the law of the land". Until there's been a decision in court, they're innocent, no matter how much grandstanding politicos (or tabloid rants) say otherwise.
"... about not owing federal taxes because he, technically, had no income ..."
You'll note that they only got him on tax fraud because: He was committing tax fraud as far as the law was concerned of the day, and more so, because they had NOTHING else on him that would stick. Apparently, crime DOES pay, who would have thunk?
However, the likes of Uber and Amazon don't have that issue, because there's no tax fraud going on.
If you don't like how the law works, change it. Whining about it on a forum doesn't fix a damn thing.
> they only got him on tax fraud because: He was committing tax fraud
Really? The feds got Capone on tax fraud because Capone was committing tax fraud? Awesome conclusion, mate! Any other mind-blowing insights you'd like to share with us today?
> However, the likes of Uber and Amazon don't have that issue, because there's no tax fraud going on.
Really, again? Who sez there is no tax fraud going on? You? Aaah, yes. You're that Internet Guy who discovered that Al Capone was convicted of tax fraud because he committed tax fraud.
Crime didn't particularly pay off in his case. If he'd spent some of his ill-gotten on treatment he might not have died so early of syphilis.
Not that this can be seen as some sort of angry-sky-entity retribution for immoral works.
Don't you just love it when a company tries to tell the government how the law should work ?
In any case, I'm almost into encouraging Uber to go on with such shenanigans. Keep it up and you'll be the landmark case to describe why the creation of an Internet Tax Board was necessary.
And honestly, I think we'll get there. With the Internet, you can sell anywhere. Well anywhere's government is going to want their share of tax, because that sale happened in their country. It is useless to try and say that you base your revenue in another country when the issue is VAT or suchlike.
Foreign goods arrive in port and are subject to local VAT rates. Heck, even inside the USA sales are subject to each State's sales tax.
Uber is going to bite the bullet on this big time, because there is no government on this planet that is going to think they are exempt from sales tax. Not gonna happen.
> Don't you just love it when a company tries to tell the government how the law should work ?
Do pay attention. Every large company has tax experts and lawyers, and probably does know more about how tax law works than politicians do, and will certainly argue the point with the tax office whenever it can. (Note I say "how tax law works", not "how tax law should work", because *opinions about how it should work are irrelevant*.)
> Do pay attention. Every large company has tax experts and lawyers, and probably does know more about how tax law works than politicians do, and will certainly argue the point with the tax office whenever it can.
In my experience many large companies employ former employees from the tax office because of the knowledge they have gained as a tax collector. Note that the employees are employeed for their knowledge not as a reward.
Not all countries impose VAT on transport. While not a taxi driver, I am pretty certain there is no VAT on taxis, bus tickets, airline tickets and so on in Denmark (where I happen to live).
Taxis are hideously expensive in the socialist utopia Bernie Sanders so loves, about USD 8 flag fall when booked and some hideous km rate and time rate on top. On the other hand the taxi will be a late model Mercedes or similar, so you get a comfortable ride
I know this will go down like a lead balloon but I'd be inclined to just scrap corporation tax altogether. It's far to easy for a company to not pay any even if they aren't doing things against the spirit of the tax. The only benefit I see to corporation tax is that it slightly incentivises some companies to invest in R&D to reduce their profit but that's certainly not the case with most of the companies in the news.
I don't know what the solution is. Perhaps raise VAT as that catches the money generated inside the country but it also disproportionately hurts the poor.
given that a lot of necessities are zero-rated or exempt.
Ah yes. Apparently, in the UK, Jaffa cakes are a necessity, and are thus zero-rated. According to some IMHO lunatic quirk in the system, tampons and other sanitary items are not (maybe because they have wings?) and UK politicians seem suddenly and strangely too keen to follow EU diktats to fix that locally. Go figure.
A Biscuit or a Cake, that is the question - not to be confused with Egytian Themed Goons from a Stargate
I still think it actually takes the biscuit they can't address that right now. I would have done it anyway, damn the EU, and use any resulting court cases to make it so politically painful for the EU that they'd go along but hey, that would take political courage.
Anyway, apparently there is a review in Q1 2016, and I hope sanit(ar)y will prevail.
I think my favourite part is this:
“We don’t think that it is appropriate that the tax office has essentially applied a 1999 law to what is a brand new business model that didn’t envisage this type of activity”, public policy director Brad Kitschke told the inquiry.
The Uber line in London, which has quite strict taxi regulations is that an Uber car cannot be considered a 'taxi' because taxis have 'taximeters' and, under the wording of the regulations, mobile-based apps are not considered to be 'taximeters'.
In other words, they are saying that, in London, an older law that "didn’t envisage this type of activity" is what should be used but, here in Australia, a law that didn't anticipate this service is unfair.
Of course, they could argue that their statements and position in the UK should have no relevance or bearing on their statements and position in Australia, but they have kind of precluded that argument having any real weight by their insistence (however correct or incorrect) that Uber is a non-national platform.
Actually, the real business model of Uber & C. is trying to move along rules gray lines, using smoke and mirrors to cover it, and trying to take full advantage of legalese and loopholes. For example, Uber is not very different from "fake" worker cooperatives used to bypass employee rules (very common, for example, in Italy, in the logistic sector).
The only difference is the use of some technology (far from being "disruptive" by itself) to achieve their aims. But for the matter, even multilevel marketing and pyramidal schemes moved to the tech area lately, and instead of "selling" physical goods they moved to "sell" services like ads or VoIP.
I make most of my money selling my games in the US. But I pay zero corporation tax there. Cos it's a UK Ltd company.
The big problem here isn't companies not paying their "fair share" of tax, it's commentards not understanding how tax law works and getting all whiney.
Please re-hire Tim Worstall.
We all know its legal. Instead of asking the same questions and getting the same answers over and over and instead of upping the gst to 15% how about changing the law to close the loop holes? For something sold in australia, australian tax is oweing or the business cant operate in this country? The gov would then be able to collect heaps more tax, fairly and legally from big business who most agree should be paying their share. The law would have to be carefully considered and written but it can be done.
Under current rules Australia income = $0
Change the rules:
1. Keep taxes etc. on transactions enacted in Australia the same
2. Set a stupid low rate on transactions enacted outside Australia by an Australian registered company.
Companies will now register in Australia to avoid every one else's less attractive tax laws.
With these rules, you'll now get the Australian sourced income you weren't getting before, and a little bit of every other countries income. Any other country that doesn't like it can enact the same regime, and we now have global competition driving down tax rates.
They're a taxi radio control centre, pure and simple, exactly like all the other taxi radio control centres that have been around since the dawn of remote taxi booking.
No they are not! If Uber were a taxi radio control centre, pure and simply, they would be invisible to the public ie. they would be an outsourced taxi radio control centre to existing taxi operators. No they are a taxi/ride business because when I want a ride I either call KLM Taxi's or I call Uber.
Remember it's all about the branding and the perception/message a business wishes to convey.
This dispute reminds me of a fracas in the US Congress about 20 years ago when the banking lobby was angrily testifying against the spread of credit unions encroaching on commercial banks business. They complained loudly that credit unions paid no taxes until someone reminded them quietly that credit unions were fraternal non-profit corporations.
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