Uber in Canada: what governments must do to protect the public interest

16-03-29 Uber

.As governments across the country grapple with the implications of the so-called sharing economy, they need to remember that the interests of the Canadian public and the interests of corporate behemoths such as Uber, are not the same.

This is the fourth post in a four-part series of articles on Uber.

The argument in posts 1, 2, and 3 can be summarized as follows:  Uber’s flagship UberX service is unambiguously illegal in most cities in Canada because municipal and provincial taxi licensing law (British Columbia and Quebec license taxis at the provincial level) considers UberX a taxi service and Uber refuses to apply for a taxi licence for UberX under these laws. And it doesn’t apply for a taxi license for UberX because it does not want UberX to operate under the same rules as the rest of the taxi industry and incur the same licencing fee, insurance, and consumer safety costs that the rest of the industry pays.

Nor does it want its UberX service to charge the same regulated fares as its taxi competitors – it wants to be able to charge “surge pricing” which sometimes increases the fare for an Uber passenger as much as 10-fold over the regular fare.

In other words, while Uber is competing for the exact same passenger dollars as the rest of the taxi industry, Uber wants to play by its own rules when it comes to industry regulatory costs and fares.

Why? Simple – without its own set of rules that reduce its costs, the UberX service can’t afford to undercut the fares of existing taxi brokers – by far its most important competitive advantage. Put differently, Uber’s business strategy is simply a political strategy designed to pressure Canadian licensing authorities into creating a separate, cheaper set of taxi rules for UberX to operate under.

How does Uber justify having new licensing rules written just for itself – rules that significantly reduce its costs relative to the costs it would incur operating under the same rules that other taxi companies operate under? Why does Uber think it deserves special treatment?

In Uber’s public statements, it is its unique technology that sets it apart from other taxi services. Uber likes to advertise itself as a technology company that provides a “digital application service” to connect passengers to drivers. In other words, according to Uber its defining feature is that it provides a software platform that connects a customer with a service. And because it is essentially a technology company, unlike other cab companies, it needs its own rules.

The problem with this rationale is obvious – by now, many taxi companies employ Uber-like digital technology that puts drivers in touch with passengers (in addition to traditional phone dispatch). And it goes without saying that the established taxi industry doesn’t think a whole new set of rules are needed just so they can deploy their nifty new apps. Continue reading

Uber in Canada: Cutting corners on taxes and benefits

16-03-12 Uber photo

Uber pays no Corporate Income Tax in Canada and it avoids paying for all forms of employee benefits by declaring its drivers “independent contractors”. The truth is that Uber is not a benign intermediary between drivers and passengers but rather a $50 billion corporate behemoth designed by an army of lawyers to exploit regulatory grey areas for the expressed purpose of undercutting fares charged by its competitors.

This is the third installment of a four part series on Uber’s entry into Canada.

To summarize Parts 1 & 2: at the heart of Uber’s global business strategy is a political strategy. Because Uber has difficulty competing with established taxi companies under existing taxi industry rules, it needs to pressure Canadian licensing authorities into creating a separate set of taxi rules for it to operate under. Put bluntly: without its own set of rules that reduce its costs, Uber can’t afford to undercut the fares of existing taxi brokers – by far its most important competitive advantage.

There are four deal-breakers for Uber in any new set of licencing rules that it pries from governments through its ferocious lobbying: 1) the new rules must allow UberX to charge “surge pricing” with no maximum cap (think New Year’s Eve, an 8.9 times multiplier, and a $1,115 charge for a 60-minute ride in Montreal) while its competitors must continue to charge fixed-rate fares; 2) the new rules must exempt Uber from the commercial insurance coverage that is mandatory for licensed taxis so Uber drivers can carry a new, less comprehensive kind of “hybrid” insurance policy that is cheaper than commercial coverage; 3) Uber must be exempted from the existing licensing fees that govern both cab owners and drivers – and be given its own licensing fee regime with much lower fees; and 4) the background safety check rules for Uber drivers should not be so onerous as to scare off potential Uber drivers. For Uber this usually means that it objects to rules requiring that driver safety checks be done through local police departments.

Because getting new rules that lower its costs is so crucial to Uber’s business strategy, when Uber doesn’t get the above provisions in a new set of rules from taxi regulators, it will either leave the market (e.g. Calgary) or simply operate illegally outside the existing rules (e.g. Toronto and many other Canadian cities). For example, even though Calgary gave Uber much of what it wanted in a new set of rules passed by Calgary City Council in late February, Uber still pulled out of the Calgary market because the specifics of the new licensing fee and driver background check rules weren’t to its liking.

There are two other major areas where Uber plays by different rules that give it an advantage over its competitors: 1) its (apparently legal) international tax avoidance strategy; and 2) its (legally contested) claim that Uber drivers are independent contractors as opposed to employees. These issues, of course, are not regulated within municipal (or provincial) taxi licensing regimes but are nevertheless central to Uber’s Canadian (indeed global) growth strategy.

The rest of this post deals with Uber’s global tax avoidance and labour strategies.

Continue reading

The secret strategy behind the Uber invasion of Canada

File illustration picture showing the logo of car-sharing service app Uber on a smartphone next to the picture of an official German taxi sign in Frankfurt, September 15, 2014. A Frankfurt court earlier this month instituted a temporary injunction against Uber from offering car-sharing services across Germany. San Francisco-based Uber, which allows users to summon taxi-like services on their smartphones, offers two main services, Uber, its classic low-cost, limousine pick-up service, and Uberpop, a newer ride-sharing service, which connects private drivers to passengers - an established practice in Germany that nonetheless operates in a legal grey area of rules governing commercial transportation. REUTERS/Kai Pfaffenbach/Files (GERMANY - Tags: BUSINESS EMPLOYMENT CRIME LAW TRANSPORT)

Even though Uber is competing for the exact same passenger dollars as the rest of the taxi industry, Uber wants to play by its own rules when it comes to fares, insurance, and licensing fees. Uber even objects to being subject to the same background checks on its drivers as the rest of the taxi industry.

This is the second of  four Canada Fact Check articles on Uber’s entry into Canada.

The main argument in Part 1 was that Uber’s flagship UberX service is unambiguously illegal in most cities in Canada because the law considers UberX a taxi service and Uber refuses to apply for a taxi licence. And it doesn’t apply for a taxi license for its UberX service for the simple reason that it does not want its UberX service to operate under the same rules as the rest of the taxi industry and incur the same licencing fee, insurance, and consumer safety costs that the rest of the industry pays. In other words, while Uber is competing for the exact same passenger dollars as the rest of the taxi industry, Uber wants to play by its own rules when it comes to fares and industry regulatory costs.

But Uber also knows that sooner or later the fact that its UberX service is operating illegally is going to catch up with it. In other words, it knows that UberX eventually has to operate under some sort of government sanctioned regulatory regime in Canada. And that’s why, long-term, it needs to have Canadian licensing jurisdictions implement separate sets of taxi rules tailored to its business model. Not tailored to its “innovative” technology as Uber and some of its boosters might claim, mind you, but tailored to the way Uber maximizes its profits.

To accomplish this, Uber has written its own taxi rules and hired well connected, high powered lobbyists with close ties to politicians such as Toronto’s Mayor Tory, to shop Uber written rules around to key Canadian licensing jurisdictions. And Edmonton is the first major Canadian city to make the Uber authored rules law.

To summarize: at the heart of Uber’s global business strategy is a political strategy. Because Uber doesn’t have the business smarts to compete with established taxi companies under existing industry rules, it has to operate either illegally or pressure local licensing authorities to create a separate set of taxi rules for its main service – UberX – to operate under. Continue reading

Why Uber is Bad For Canada

16-02-02 uber

Taxi drivers in cities across Canada have taken to the streets to pressure municipalities to enforce existing taxi industry regulations in the face of the Uber challenge.

Just over five years after it began offering rides in San Francisco, the Uber passenger service now operates in 342 cities spread across more than 60 countries. It retains some 327,000 freelance drivers in the U.S. and hundreds of thousands more around the world. In Uber’s most recent round of financing, investors assigned it a value of $51 billion—a milestone it reached faster than Facebook had before it. According to a recent report by Reuters, Uber has told prospective investors that it will reach $10.8 billion in global ride payments in 2015—giving it $2 billion in revenue when it takes its 20% cut. It projected those numbers, the Reuters report says, to more than double to $26.12 billion this year.

While it primarily offers car rides today, Uber is aiming to be much more. With its UberRush service, the company has experimented with delivery. Uber CEO Travis Kalanick has described Uber as a new platform to help replace inefficient 20th-century transportation systems. Continue reading

Climate change policies hit corporate push back

Prime Minister Justin Trudeau Addresses Paris Climate Change Conference

Prime Minister Justin Trudeau Addresses Paris Climate Change Conference. Despite Trudeau’s high profile Paris claim that “Canada is back”, almost all the heavy lifting on the climate change file is being done at the provincial level.

Prime Minister Trudeau received considerable media attention earlier this week in his appearances at the UN Climate Change Conference in Paris.

But beyond the photo-ops starring our telegenic PM, the question still remains as to what exactly Canada is bringing to the table in Paris?

The context

The purpose of the Paris UN conference is to somehow reach an agreement covering the post-2020 period that would require participating countries to set carbon-reduction targets that, while not legally binding on individual countries, will be considered “moral” obligations.

What then is Canada proposing to contribute to the fight against global warming?

On the international front, Trudeau has already announced that Canada will contribute $2.65 billion over five years to help developing countries reduce their reliance on fossil fuels, doubling Canada’s current contribution. And in Paris he also reaffirmed a campaign pledge to invest $300 million in research and development on clean technology.

But the far trickier issue is how to reach the domestic emissions targets already established here at home.

Trudeau has committed to reducing Canada’s carbon emissions by 30 per cent from 2005 levels by 2030. That’s the same target set by the Conservatives, the difference being that the Liberals regard it as “a floor, not a ceiling.” Most importantly, within 90 days of Paris he plans to host a meeting with the premiers to firm up the specific carbon-pricing policies and investments that will be required to make good on that pledge. Continue reading

Is Canada finally getting a national pharmacare program?

Pharmacare health minister Jane philpott Trudeua

Health Minister Jane Philpott has been tasked by Prime Minister Trudeau with finding solutions to Canada’s prescription drug affordability problem.

Momentum has been building for a national pharmacare program since a June meeting of provincial health ministers.

Canada’s new Health Minister, Jane Philpott, says she plans to be in touch with her provincial counterparts to begin the preliminary work of establishing a new health accord which, according to some health experts, could include at least the broad outlines of a national pharmacare program. The 2004 Health Accord expired March 31st, 2014 after the Harper government refused to renegotiate it.

So what can Canadians expect from their new federal government when it comes to making prescription drugs more affordable?

In contrast to other policy areas, the Liberal election platform planks on pharmacare were strikingly vague.  According to the platform:

“We will improve access to necessary prescription medications. We will join provincial and territorial governments to negotiate better prices for prescription medications and to buy them in bulk – reducing the cost governments pay to purchase drugs.”

Not too many clues here as to where the new Trudeau government might end up on pharmacare. That said, Ontario’s Liberal government  has been a strong provincial advocate for an aggressive approach to drug coverage and was extremely critical of the Harper government’s hands-off approach to the issue. Given the close ties between the two Liberal governments, most observers expect the new federal government to be active in future national pharmacare talks.

That next health ministers meeting is expected to take place on January 21-22, 2016 in Vancouver and federal health Minster Philpott has said she will be attending. Continue reading

Bay Street and the Hydro One Sale

Of the many options available to the Ontario government to finance its $130 billion infrastructure plan, selling 60% of Hydro One is pretty much the worst.

Of the many options available to the Ontario government to finance its $130 billion infrastructure plan, selling 60% of Hydro One is pretty much the worst.

It is becoming increasingly clear that the Ontario government is making a serious mistake in its plan to sell off a majority interest in Hydro One. According to a report from Ontario’s new Financial Accountability Officer, the province will be in even worse financial shape after the planned sale of 60 per cent of Hydro One than it is now.

Even former TD Bank CEO Ed Clark, the driving force behind the sale, readily admits that there will be significant forgone revenue from the sale of Hydro One down the road. But he, like Ontario Premier Kathleen Wynne, dismisses this on the grounds that the  partial sale of Hydro One is needed to help pay for Ontario’s plan to spend $130.5 billion over 10 years on transit, bridges, highways and other infrastructure.

Unfortunately, while it is undoubtedly true that the planned investments in Ontario infrastructure are badly needed, it is also true that of the various options available to the province to pay for its ten-year, $130.5 billion infrastructure investment, selling 60% of Hydro One is pretty much the worst option.

So why is the Ontario government selling off one if its most valuable assets in what seems like a clear cut case of “short-term gain for long-term pain”?

The sell-off of Hydro One is yet another chapter in the ongoing saga of an Ontario government mesmerized by private sector promises that a healthy dose of private sector, market “discipline” will somehow translate into the public good.

The names are familiar: eHealth, Ornge, the Mississauga and Oakville private gas plants, and public-private hospitals and transit – to name just a few.

The problem? Each and everyone turned out to be a train wreck of truly monumental proportions.

And now Hydro One. Continue reading

Trudeau, Wynne Pension Visions on Very Different Paths

15-10-28 trudeau wynne cpp hug

Despite the big hug and a short-term promise by Trudeau to help implement Ontario’s new pension plan, a look beneath the surface reveals serious obstacles to reconciling Wynne’s and Trudeau’s pension visions.

Prime Minister Elect  Justin Trudeau has promised to do what Stephen Harper pointedly refused to do – help Premier Kathleen Wynne implement Ontario’s new pension plan.

But reconciling Trudeau’s long-term vision of enhancing the Canada Pension Plan (CPP) with Wynne’s “ready-to-go” Ontario Retirement Pension Plan (ORPP), could prove tricky.

Trudeau to help on short-term implementation issues

The Conservative government refused to change federal regulations to help establish and collect contributions for the Ontario Retirement Pension Plan (ORPP), which is due to start collecting premiums in January, 2017.

In fact, the pension issue had become a significant point of conflict between the federal Conservative government and the Ontario Liberal government. During the recent campaign, Mr. Harper went so far as to say that he was “delighted” that his decision not to help Ms. Wynne “is making it more difficult for the Ontario government to proceed.”

But what a difference an election makes! The two Liberal leaders had a brief meeting at Queen’s Park on Tuesday and there appeared to be a complete meeting of the minds on the pension issue – at least in the short term.

According to a statement issued after the meeting, the new federal Liberal government will “direct the Canada Revenue Agency and the Departments of Finance and National Revenue to work with Ontario officials on the registration and administration of the [ORPP].”

Registration refers to the fact that unless a pension plan is registered under the terms of the federal Income Tax Act, employee and employer contributions are not tax deductible. Once registered, pension contributions and investment earnings are tax-exempt until benefits are paid to a retiree.

Administration primarily refers to piggy-backing ORPP premium deductions on the existing CPP payroll contribution infrastructure. Ontario had issued a request for proposal for a third party to help administer the plan because of the outgoing Conservative government’s refusal to co-operate. Now it won’t need that third-party partner, which means the ORPP should be less expensive to operate. Continue reading

Five Key Issues Facing the Trudeau Government

Trudeau

In its first few months, the newly elected Trudeau government will be facing a range of issues including infrastructure, pensions, and a middle class tax cut.

In this post, Canada Fact Check takes a look at five key issues facing the newly elected Trudeau government for the period leading up to, and including, the early-Spring budget.

Infrastructure

The new Liberal government’s top priority will be to quickly implement its high profile infrastructure program.

Trudeau says a Liberal government will run deficits for three straight years and will double spending on infrastructure to stimulate economic growth.

According to a Liberal policy paper, the Liberal fiscal plan would see “a modest short-term deficit” of less than $10 billion for each of the first three years and then a balanced budget by the 2019-2020 fiscal year.

The policy paper suggests that over the next decade the Liberals would spend $125 billion on new infrastructure investment — about twice the amount the Conservatives had committed for infrastructure. Much of this new infrastructure would be financed through a new Canada Infrastructure Development Bank.

Liberal infrastructure investments would focus on three areas: public transit, social infrastructure such as affordable housing and child care, and environmental projects like clean energy.

Projects funded would reflect the priorities of the provinces and municipalities. Continue reading

What you need to know about the Trans-Pacific Partnership (TPP)

15-10-11 TPP

Current rules under the North American free-trade agreement (NAFTA) require that 62.5 per cent of auto parts come from North America in order to avoid tariffs. Under the TPP, content requirements are lower and this may cost Canadian jobs. A 45-per-cent level will be  required to be considered duty-free for some parts and 40 per cent for other components.

 

 

What is the Trans-Pacific Partnership (TPP) ?

Canada, U.S. and Mexico have long had special access to each other’s markets under NAFTA.

Instead of a group of three as under NAFTA, twelve countries would share in the advantages of TPP membership. Broadly speaking, the Trans-Pacific Partnership (TPP) is similar to NAFTA in that it involves pledges to reduce or eliminate tariffs on a wide range of goods and services. It also sets out rules for resolving disputes and provides a modest attempt to set some minimum employment standards in the twelve member countries.

Could anything stop the implementation of the TPP?

The TPP deal still requires the approval of the U.S. Congress and many Democrats and some Republicans are expressing strong reservations about the deal.

For example, just days after the signing, leading Democratic Presidential candidate Hillary Clinton said she couldn’t support the TPP. Continue reading