A new law aimed at discouraging Uber and other ride-sharing companies from using tax loopholes to shift the costs of the trip to drivers could provide relief to those who rely on them.
The new law, which was introduced in the Ontario legislature last week, would provide an exemption from the city’s transportation tax for any ridesharing company that uses a tax break, like a $10-per-mile taxi or a $3-per year Uber or Lyft.
It would also allow ride-share companies to keep their tax breaks if they don’t meet certain standards.
But Uber and Lyft, which use a $4-per cent commission to provide drivers with a fixed share of the fare, are challenging the exemptions in court.
They have also filed lawsuits against Toronto, arguing that the city is not exempt from the exemptions.
“It’s an attempt to force them out of the market,” said Stephen Jones, an assistant professor of economics at Carleton University who studies taxi industry issues.
“They want to make sure they’re not going to be allowed to operate as an affordable transportation option.”
Uber and Lyft argue that the exemptions are part of a $1.3-billion-a-year tax break for ride-hailing companies that could be used to undercut competitors, such as Uber and the New York-based ride-matching app Lyft.
They argue that Uber and others unfairly compete against traditional taxi companies that offer a lower price, and have an incentive to squeeze out their competition by offering a lower-priced service.
The exemption is set to expire on June 30, but the city could re-examine the rules once it receives a recommendation from the tax office on whether to extend it.
Uber and ride-pool companies have also argued that they are in the business of providing a service and not charging drivers commissions, which they say is a tax.
The city, however, has said that it wants to make it clear that Uber drivers pay taxes and are subject to the same regulations as other drivers.
The city says that in order to comply with its transportation tax exemption, all taxi companies must offer a $25 per-hour, minimum-wage wage for all drivers, which is higher than most other city-regulated jobs.