In the Court’s view, Uber had enough control over those drivers’ businesses that they couldn’t be considered contractors.
The Court convinced itself that those drivers could not really run apps from competitors like Didi and Ola, or even Door Dash, at the same time.
Uber drivers who accept at least 85 per cent of offered rides get information about the direction and duration of offered rides. The decision concluded that drivers would not risk taking a ride from another app because doing so would mean having to turn down rides offered by Uber.
I wonder whether any of the justices have ever ridden in an Uber. If they had, they would know Uber drivers are undeterred by the Court’s imagined problem.
The solution is obvious. Drivers taking a ride for another company simply log out of Uber while on that other ride. No rides are offered to drivers who are not logged in.
It is a strange kind of employment that allows you to take on jobs for a competitor while on the clock.
The Court’s ruling opens no end of messes.
Most obviously, an Ipsos survey of Uber drivers shows they really value not being in a standard employment relationship. Uber is flexible. They can drive, or not, as suits their schedules. It will be impracticable to run Uber on an employment model with that kind of flexibility. Rostered shifts are far more likely.
But there are more problems.
Deloitte tax expert Robyn Walker wonders what Inland Revenue will do.
You see, Uber drivers run their own businesses, driving for Uber and other companies. Their vehicles are business expenses – along with running costs and road user charges. They may have taken a GST credit on the car purchase.
Employees cannot claim deductions for costs associated with earning income nor be GST-registered for services provided to their employer. Inland Revenue will have to decide whether drivers are employees for tax purposes and, if so, how to unwind years of now-incorrect tax filings.
It risks being a terrible, terrible mess.
The Select Committee is due to report back on the Employment Relations Amendment Bill just before Christmas. That Bill makes clear that platform drivers are not employees.
I hope that that legislation can quickly clean up the mess that our enlightened Court has created.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
Uber drivers who accept at least 85 per cent of offered rides get information about the direction and duration of offered rides. The decision concluded that drivers would not risk taking a ride from another app because doing so would mean having to turn down rides offered by Uber.
I wonder whether any of the justices have ever ridden in an Uber. If they had, they would know Uber drivers are undeterred by the Court’s imagined problem.
The solution is obvious. Drivers taking a ride for another company simply log out of Uber while on that other ride. No rides are offered to drivers who are not logged in.
It is a strange kind of employment that allows you to take on jobs for a competitor while on the clock.
The Court’s ruling opens no end of messes.
Most obviously, an Ipsos survey of Uber drivers shows they really value not being in a standard employment relationship. Uber is flexible. They can drive, or not, as suits their schedules. It will be impracticable to run Uber on an employment model with that kind of flexibility. Rostered shifts are far more likely.
But there are more problems.
Deloitte tax expert Robyn Walker wonders what Inland Revenue will do.
You see, Uber drivers run their own businesses, driving for Uber and other companies. Their vehicles are business expenses – along with running costs and road user charges. They may have taken a GST credit on the car purchase.
Employees cannot claim deductions for costs associated with earning income nor be GST-registered for services provided to their employer. Inland Revenue will have to decide whether drivers are employees for tax purposes and, if so, how to unwind years of now-incorrect tax filings.
It risks being a terrible, terrible mess.
The Select Committee is due to report back on the Employment Relations Amendment Bill just before Christmas. That Bill makes clear that platform drivers are not employees.
I hope that that legislation can quickly clean up the mess that our enlightened Court has created.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
1 comment:
What seems to Crampton to be a big tax mess may in fact be a blessing in disguise for Inland Revenue. That's because the Supreme Court has just given them a big tool they can use to go after the gig economy and its inherent tax evasion opportunities.
The Court has ruled that the four Uber drivers are legally employees. That precedent is powerful and may reasonably be applied to all other Uber drivers operating under the standard Uber contract.
So now IR needs to make it clear to Uber that, as an employer, the Income Tax Act requires them to deduct PAYE from all payments made to employee--drivers. That will lock all drivers into the tax net for the 2025/26 and subsequent tax years.
Then the IRD needs to investigate the drivers' tax treatment of Uber-sourced income in prior years. This would require Uber to provide a list of all payments made to all drivers, say in the prior four tax years, and IR cross-matching them to the drivers' personal returns for those years. That would readily disclose any discrepancies and the normal reassessment processes would then follow.
This is not complicated stuff, and should be just another day at the office for IR staff. But it will send the message to the bad actors in the gig economy that IR is serious about enforcing tax compliance. They have been playing whack-a-mole with the wider hidden economy for years. Now the Supreme Court has given them fresh authority to go to the next level.
And if the drivers feel aggrieved, they need to be reminded that it was they who initiated the legal action, presumably to get the benefits of being an employee (holiday pay, sick leave and so on) so they can't have it both ways when it comes to their tax obligations.
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