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Comment by peeters | Hacker News Reader

If it quacks like a duck, it gets taxed like a duck. Uber has made a business out of exploiting legal loopholes. They know it, their users know it, the politicians know it. It's just been a race to close them. I have no sympathy for Uber in this. They obviously provide a valuable service to people, so I'm sure they'll survive. Now they'll just be competing on an even playing field.

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I used to work for Landstar[0], which operates in a very similar way to Uber, but in the trucking industry. The company has been around for almost 30 years and the drivers are considered Owner-Operators[1] (i.e. contractors). I was under the impression that an Uber driver could choose not to take any given fare(just like our truckers could). There seems to be some irrationality when it comes to Uber among my fellow engineers, and I can't figure out why.

[To be clear: I've never used Uber nor would I generally consider it over my local 'trolley' in the ~35K population town in which I live.]

[0]https://en.wikipedia.org/wiki/Landstar_System

[1]https://en.wikipedia.org/wiki/Owner-operator

if the Landstar drivers refuse too many fares are they banned forever from the system?

Not officially, but I'm sure it was happening. Each individual Landstar broker operates independently as well, so if a given driver is constantly saying no, I am certain the broker would stop calling that driver (or at least put them further down the list). It was obviously a more 'manual' and distributed process, that started in the 70's with companies like Dial-a-Truck:

https://en.wikipedia.org/wiki/Dial-a-truck

These systems morphed into what is called a 'load board,' and Landstar operated what was more of a network of independent trucking brokers with their own shared/ private load board.

Imo the contractor designation should be limited to people who have pricing power for their work. Uber drivers have none.

Technically, having the option to decline fares is a form of pricing power.

I think that's a somewhat fair comment, and a t0pic worthy of discussion. According to wikipedia[0],

In economics and particularly in industrial organization, market power is the ability of a firm to profitably raise the market price of a good or service over marginal cost. In perfectly competitive markets, market participants have no market power.

I'm pretty sure I don't have the exact facts on what Uber's operating agreement with drivers is, but I always thought a given driver could choose to only drive during surge pricing, no? We always tried to manage our drivers for an elastic supply of capacity (much like an ad exchange). Otherwise, we'd be overwhelmed like the under-covered transport problem in Austin during SXSW (I believe a result of the lack of Uber availability). Uber's radio adverts explicitly state that it's "drive when you want for extra money," and if that is not what they actually offer then Lyft has a huge opportunity to acquire/retain more/better drivers and maintain a rapid ability to scale for capacity.

I am of the belief that Uber presents a unique opportunity to rethink the whole structure of unions in the US (I don't actually care if Canada bans Uber altogether, for example, I am more interested in the concepts themselves), and maybe a total rethink about how to organize labor.

I would have interest in building a commercial platform to help labor organize and coordinate themselves better (that they own) in the modern world. I think it would look like a gated digital community with microblogging, discussion, and voting functions.

[0]https://en.wikipedia.org/wiki/Market_power

The important part is this: market power is the ability of a firm to profitably raise the market price of a good or service over marginal cost

The driver does not raise the price, Uber does. Uber has the market power here.

>I'm pretty sure I don't have the exact facts on what Uber's operating agreement with drivers is, but I always thought a given driver could choose to only drive during surge pricing, no?

Perhaps, I should have been more direct. A contractor should be able to set and negotiate rates. If they can't do that I think they're an employee. For example, if I need to hire a general contractor for a construction job I can shop around, compare rates, pick the best one AND haggle with them if need be. If I need to hire an Uber, I have no "haggle-power" OR ability to shop around because Uber sets the rate. None of the contractors are competing against each other because Uber controls the marketplace and this is where I think the contractor designation breaks down. If you tightly control the market, the people in it are employees, if the market is more free, the people in it are probably contractors.

>I am of the belief that Uber presents a unique opportunity to rethink the whole structure of unions in the US, and maybe a total rethink about how to organize labor. I would have interest in building a commercial platform to help labor organize and coordinate themselves better (that they own) in the modern world. I think it would look like a gated digital community with microblogging, discussion, and voting functions.

This sounds interesting but personally I'm of the mind that poor labor organization is a political problem. How would your app help workers beyond just a place to communicate?

If they were employees then Uber would also get to set their hours and they wouldn't have the option to decline any fares. They also couldn't use any other services concurrently (many drive for both Uber and Lyft at the same time).

Uber also doesn't control the market. There is also Lyft and any other competitor is welcome to start and offer better rates for the driver. Or even offer variable pricing where every driver can set their own rates and consumers can pick the lowest bidder. Drivers have the power to switch providers or use multiple simultaneously.

Uber doesn't meet its responsibilities as a direct employer because those responsibilities would increase their costs, like scheduling drivers for shifts. And Uber has tried in the past to prevent its drivers from working for competitors. They pick and choose, oh our drivers are independent contractors but we're also going to just take their individual tax exemptions and apply them to ourself. Come on...

Just because Uber doesn't adhere to our common social contract doesn't mean they don't have to. Unethical behavior is not justification for that same behavior.

In the US, at least, the employee/contractor difference is based on a number of factors, but one important factor is the level of control over the person doing the work. If you're setting their working hours, or deciding which jobs they'll take or how they'll do them, or setting their wage/pricing for them, etc., those are things which point toward the "they are an employee" side of the spectrum.

But it isn't that straightforward, because your can have a 10x ninja developer who works whenever they want and picks their own projects, but is still an employee.

That's not a problem. The point in the tax code is to prevent offloading the tax liability by classifying people who are rightfully employees as contractors instead.

I'm reasonably certain the tax code has no regulation that says you must be classed a contractor if you meet certain criteria.

Sure. No problem. They've used loopholes for the last 4+ years, which is fine. Given they still have a massively superior service to taxi's, now let them compete.

They used to have a massively superior service to taxis, until taxi drivers started to work for Uber. The quality has dropped dramatically.

Maybe working for Uber became more like driving a taxi... dun dun dun

You're missing the main point of the argument. It's not a loophole.

There are a certain number of criteria for employees vs contractors, based on whether training/equipment is provided, price setting, ability to turn down jobs, etc etc.

If you're classified as an employee, there are a bunch of things you have to do, such as collect GST, deal with health care, sick days, paternity leave, taxes, etc.

Uber is making the case that its drivers are contractors, since they set their own hours and purchase and maintain all their own equipment. It's a plausible argument, and that's something for the courts to sort out.

Just saying that they need to collect GST because the drivers are employees is begging the question.

If Uber drivers are classified as employees, what's next? Upwork and eLance workers classified as employees?

They need to collect GST because a Good or Service is being provided and that's what the Tax covers.

You're missing the point, and begging the question.

If the good or service is being provided by a non-taxi contractor who makes less than 30k a year, then you don't have to collect the GST and the tax doesn't cover that.

If the good or service is being provided by Uber, a non-contractor who makes over 30k a year, then you have to pay the tax.

What we're debating here is who provides the service and their legal status.

I'm deliberately ignoring your point actually, because it's moot. The law is being changed to eliminate your first case (independent small suppliers) and declare those services to have been provided by a single entity (Uber). Both sides of your debate are now one.

There's a certain amount of circular reasoning inherent here, because a government ministry made a declaration. It's not just an objective observation of reality, it's a declaration of what that reality will be henceforth.

Was it a good decision? In my opinion yes, because it better reflects the original intent of this particular tax. Anyone trading on the brand-name of "Uber" and using Uber's infrastructure is not a small supplier (who has to build and market their own brand and build their own infrastructure). And they are clearly supplying a good or service, which was my point expressed in embryonic form above, so they can go ahead and collect the tax.

If you look at the context of the thread, the parent basically said that the old laws should have applied to Uber and that they should have been collecting taxes all along but wasn't by exploiting legal loopholes.

My point is that Uber did not have to pay taxes, and their obligation to collect taxes was unclear. Under the new law they have the collect taxes. Under the old law, it was plausible that they didn't.

The main takeaway is that most aspects of the legal system, including definitions for commonly accepted terms, are not actually clear.

Especially your argument on intents of taxes. I don't believe that brand-name and infrastructure alone make an employee out of an independent contractor. Also, based on your brandname and infrastructure arguement, should people who sell handicrafts on Etsy or Amazon be classified as employees of Amazon and be forced to pay GST on all sales?

I'm absolutely not addressing who's an employee and who's an independent contractor. That distinction isn't needed or useful. Cleanse it from your mind for a minute.

Also, they wouldn't pay GST; they would collect it from customers and pass it on to the government.

The question is what entity provides the service? In name, it's Uber. Do you take a Joe Johnson? Or do you take an Uber?

The point of contact is Uber also. You contact Uber for a ride, not Joe Johnson.

What entity sets the price? What entity collects the money? Uber.

There are some differences with Amazon and Etsy, but in general I think for this purpose if you partner up with a big company, you are not necessarily a small supplier anymore.

OK, lets take as granted that the service is actually being provided by the drivers and not Uber, who is just acting as a facilitator of the payment. I would still argue that they should have owed taxes all along, because even in that case they are providing a service. It's just that the service they are actually providing is to the drivers -- matchmaking and payment collection. So the cut they take from the drivers should have been taxed all along.

The verbiage says the GST applies to goods and services bought in Canada. Also there's some sort of credit you can deduct, which bears further looking into, based on the goods and services you consume and pay GST on.

Basically, the taxation law is unclear, because you could easily argue that the service is purchased in the United States, where the Uber servers and the internet connections are. In that case, we're talking about Uber not really being a Canadian company, just that it has subcontractors working in Canada, making it exempt from taxes.

It seems like a lot of people have already decided whether or not Uber should be paying taxes, and now are retroactively applying logic to justify their original decision.

> ... you could easily argue that the service is purchased in the United States...

I could support that view, as long as they then pay taxes on that income in the US. I don't personally like the idea of shifting the money like that; I think eliminating such tactics would do a lot to fix tax havens. But at the same time I also recognize it as a pretty common and typically legal tactic for tax purposes.

The EU, for instance, closed that hole with the law that VAT taxes will be paid based on the customer's location. If such a law existed in Canada, then Uber wouldn't be able to argue that the purchase was made in the US.

> It seems like a lot of people have already decided whether or not Uber should be paying taxes, and now are retroactively applying logic to justify their original decision.

I agree, though I hope you weren't applying that to me. I was taking Uber's view as a given, but to me it still seemed that taxes would be owed for services rendered. Just that it would be services rendered to the drivers, not to the riders.

>Uber has made a business out of exploiting legal loopholes.

I find that kind of argumentation silly. They brought to the taxi industry, what is common in other industries, like construction, tech, etc. Stated differently, Uber has been able to provide a competitive service by legally structuring themselves in a way maximizes return for the themselves, for the driver, but still keeps costs low client due to say structuring.

They brought everything they could. I'm not criticizing them for that. Taxi companies didn't even have apps 5-10 years ago. But a ton of what they have been doing obviously goes against the spirit of the laws they're leveraging. The GST loophole is a perfect example. It's meant to allow tiny businesses to avoid the paperwork and overhead associated with collecting GST. But Uber would be doing all that overhead for their "employees", since they broker all of the fee collection. So the employees wouldn't have to bear that cost anyway. Why should they be exempt then?

I'm still not sure how that's considered a loophole. The people who work for them are in fact small business operators, and it most certainly does simplify the process for them not having to pay for GST.

Is your argument that you wish they had structured it differently so they were forced to pay more taxes? If that was the case then the drivers would be making a less, and the passengers would pay a more to cover the costs of the GST, and I don't see the point in that.

If taxi companies want to level the playing field, why don't structure themselves in more innovative ways like Uber did instead of forcing others to pay more taxes?

The GST is supposed to apply to just about everything equally, with a few exceptions. If you want consumers to pay less GST, vote for a government that will reduce it, as in 2006.

The government is doing exactly the right thing in changing the law so that irrelevant differences in corporate structure don't affect the tax paid.

> Uber has been able to provide a competitive service by legally structuring themselves in a way maximizes return for the themselves, for the driver, but still keeps costs low client due to say structuring.

In fact, they haven't. They're taking a huge loss on subsidies to the fares.

That the maximum is a loss doesn't negate it's place as the maximum. They could do worse for themselves. A house could burn down faster.

Of course. I was pointing out that they are not keeping costs low. They are just unsustainably subsidizing them.

There is no such thing as a loophole. The law is the law. Isn't every tax deduction really just a loophole? It's every company's fiduciary duty to minimize expenses using any legal means at their disposal. It's idiotic to criticize a company for using the law to their advantage. There is nothing stopping a competitor from doing the exact same thing. The law applies equally to everyone. It isn't Uber's fault taxi companies have structured their businesses the way they have.

Yep, the law is the law. Which is why the government is changing the law instead of just complaining loudly.

Uber had a special use case, which allowed them to claim certain tax benefits. These have now been adjusted in Canada.

>>There is no such thing as a loophole. The law is the law. Isn't every tax deduction really just a loophole?

No. A loophole is when a given law is exploited in a way that was not intended by the people who wrote it, usually by resorting to small technicalities in the law itself, or by referring to other, related laws.

In this particular case, a law that was intended to benefit small businesses is being exploited by a mega corp. Hence, loophole.

Isn't it technically incorrect it's their fiduciary duty to minimise expenses? As long as a company has a rationale for their decision (with negative PR from tax issues being a legitimate one), there's no onus on them to hunt loopholes out.

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