AGL 40.00 Decreased By ▼ -0.16 (-0.4%)
AIRLINK 129.53 Decreased By ▼ -2.20 (-1.67%)
BOP 6.68 Decreased By ▼ -0.01 (-0.15%)
CNERGY 4.63 Increased By ▲ 0.16 (3.58%)
DCL 8.94 Increased By ▲ 0.12 (1.36%)
DFML 41.69 Increased By ▲ 1.08 (2.66%)
DGKC 83.77 Decreased By ▼ -0.31 (-0.37%)
FCCL 32.77 Increased By ▲ 0.43 (1.33%)
FFBL 75.47 Increased By ▲ 6.86 (10%)
FFL 11.47 Increased By ▲ 0.12 (1.06%)
HUBC 110.55 Decreased By ▼ -1.21 (-1.08%)
HUMNL 14.56 Increased By ▲ 0.25 (1.75%)
KEL 5.39 Increased By ▲ 0.17 (3.26%)
KOSM 8.40 Decreased By ▼ -0.58 (-6.46%)
MLCF 39.79 Increased By ▲ 0.36 (0.91%)
NBP 60.29 No Change ▼ 0.00 (0%)
OGDC 199.66 Increased By ▲ 4.72 (2.42%)
PAEL 26.65 Decreased By ▼ -0.04 (-0.15%)
PIBTL 7.66 Increased By ▲ 0.18 (2.41%)
PPL 157.92 Increased By ▲ 2.15 (1.38%)
PRL 26.73 Increased By ▲ 0.05 (0.19%)
PTC 18.46 Increased By ▲ 0.16 (0.87%)
SEARL 82.44 Decreased By ▼ -0.58 (-0.7%)
TELE 8.31 Increased By ▲ 0.08 (0.97%)
TOMCL 34.51 Decreased By ▼ -0.04 (-0.12%)
TPLP 9.06 Increased By ▲ 0.25 (2.84%)
TREET 17.47 Increased By ▲ 0.77 (4.61%)
TRG 61.32 Decreased By ▼ -1.13 (-1.81%)
UNITY 27.43 Decreased By ▼ -0.01 (-0.04%)
WTL 1.38 Increased By ▲ 0.10 (7.81%)
BR100 10,407 Increased By 220 (2.16%)
BR30 31,713 Increased By 377.1 (1.2%)
KSE100 97,328 Increased By 1781.9 (1.86%)
KSE30 30,192 Increased By 614.4 (2.08%)
Business & Finance

Uber UK forced to Pay Up £1.5bn in VAT - Why Competition Laws are Necessary?

  • After exploiting loopholes in UK tax law to avoid paying VAT for a long time, Uber UK was forced to pay £1.5bn in VAT.
  • As global companies expand to new developing markets, competition and tax laws must evolve across the globe to protect consumers and domestic industry.
Published October 23, 2020
Source: Business Insider
Source: Business Insider

The Good Law Project has forced the HM Revenue and Customs (HMRC) UK to collect £1.5bn in VAT from Uber. The car service has avoided paying VAT by treating its 40,000 UK drivers as separate businesses, which are too small to register for VAT.

As companies like Uber grow bigger and bigger across multiple sectors, dominating entire markets, it becomes difficult to regulate their growing power. Competition authorities across the globe also become hesitant to intervene with the growing power of such companies and startups that bring new technological innovations.

Uber’s case is particularly interesting. One one hand the ride-hailing service claims that its drivers are independent businesses and not employees, but on the other, it has the power to control the prices charged by these drivers.

In the UK, Uber has been able to avoid paying VAT on its booking fees using a loophole in the EU and UK tax rule. Two of Uber’s main competitors, Gett and mytaxi, pay VAT on their fees. Hence, HMRC’s inability to regulate Uber has given it an unfair advantage over its competitors, allowing it to defy the main intent of the VAT law.

VAT payments will cost the company around £1000 a year on average for each of its UK drivers. This amount may increase with an expansion in Uber’s operations in the UK.

Similar loopholes are also exploited by other companies such as Google and Facebook to avoid VAT on transactions with small businesses. However, companies like UBer benefit more from this as drivers’ fees are their main source of revenues.

This issue becomes even more concerning in developing countries like Pakistan where regulatory oversight is weak, services tax law is not comprehensive enough and bigger companies have greater opportunities to engage in rent-seeking behaviour.

Hence, this brings attention to the growing need to transform competition laws and tax regulations across the world as global companies grow in size and expand to new geographical markets.

Comments

Comments are closed.