Clean Transport

Published on May 10th, 2016 | by Jo Borrás


Less Than 2% Of Uber’s Revenue Subject To US Taxes

May 10th, 2016 by  

Originally published on Gas2.

Despite not showing big profits yet, Uber is making moves to ensure that it pays next to nothing in taxes if and when it finally does become profitable. It was recently reported that Uber, in a presentation made to investors last fall, had assigned its IP to Bermuda. As a result, less than 2% of its total revenue would be subject to taxes by the Federal government.


“Artful Dodger” Uber CEO Travis Kalanick

This is a story that was first covered earlier this week by Bloomberg reporter David Kocieniewski, who writes that a new breed of “sharing economy” companies like Uber will, as they eventually move towards profitability, transform huge chunks of the US economy, potentially putting billions of dollars in corporate tax revenue at risk.

In the original article, Kocieniewski writes:

For years, pharmaceutical and tech companies including Pfizer, Merck, Google, and Apple have slashed their U.S. federal tax bills by using offshore tax havens and shifting profits abroad. Airbnb and Uber are starting to extend this strategy across vast new fields: PricewaterhouseCoopers estimates that sharing-economy businesses generated $15 billion in revenue in 2014 and will take in $335 billion in 2025, growing largely at the expense of companies that pay billions in US taxes.

All of which should come as no surprise to people who’ve looked at Uber as a new technology that’s a bit too good to be true — even if you ignore the thousands of alleged sexual assault complaints against Uber drivers and the company’s somewhat difficult-to-understand insurance coverage policies. But that’s just my take, and I’m usually pretty negative, anyway.

What do you guys think? Is Uber making moves that are technically within the letter of the law to avoid paying taxes something that most people will ignore, or is it just one more reason to question the ethics of the company’s management? Let us know in the comments.

Source | Images: Bloomberg, via Boing Boing.

Reprinted with permission.


About the Author

I've been involved in motorsports and tuning since 1997, and write for a number of blogs in the Important Media network. You can find me on Twitter, Skype (jo.borras) or Google+.

  • hybridbear

    If you have an issue with this, show it by voting for politicians who’ll do something about it. Everyone tries to pay as little taxes as legally possible. As long as these companies aren’t violating the law, there’s nothing wrong with what they do.

  • M Bark

    Now that we’re again all “buddy-buddy” with Cuba, perhaps we could effect a friendly takeover of those islands nearby our new friend. Yes: Invade the Caymans, nationalize all the filing cabinets our profitable, tax dodging companies call Headquarters, and collect the unpaid, overdue taxes. Today’s tax havens remind me of the “beggar-thy-neighbor” policies so popular during the 1920s that ultimately and directly led to the Great Depression & bankrupted the entire planet. Public needs (infra-structure, education) replaced by well maintained filing cabinets. Sigh.

  • JamesWimberley

    These people have convinced themselves, in a sort of collective sociopathy, that they have s fiduciary duty to shareholders to pay as little taxes as possible to the societies that make their businesses possible in a thousand ways, from schools to courts to limited liability.

    The solution to international corporate tax avoidance by profit shifting is simple, and had been used between US states for decades. It’s unitary taxation or formulary apportionment (Google either). Since profits can be shifted so easily, you stop the impossible task of reconstructing where they “really” arose and divide the total by some much more objective indicator of real economic activity, like sales or payroll or value added.

    It’s high time to put a stop to these dishonest fiddles, on a colossal scale.

    • eveee

      It’s ok to step on bodies in the name of capitalism. It says so right here in the contract….
      And free enterprise is American and protected by the founding fathers who banned slavery.
      Besides, what could go wrong with me blindly and selfishly pursuing my own self interest. That will benefit others by the silent hand treatment.

  • eveee

    Oh I thought uber made money by providing wonderful living wages to independent contractors that could set their own prices unimpeded by a billionaire with a team of high priced lawyers offering a cutthroat system of driver rate reductions via a click to agree software update with no meaningful option but agree or not get paid like a coal company with a company store. Oops they’re not wages and they are not paid as employees because they have no benefits, but they can’t set their own prices. Or get tips.
    But now I find out uber makes money by not paying taxes, cheating on TNC rules, and not spending any money on filtering serial killers from its workforce, er I mean independent contractors.
    Great. Where can I sign up. Noooo. Not as a driver. As an investor. I can see the beauty of a wage slave scheme when I see one. Great profits. Exploitation means profits. If only those mean regulators would stay away. They ruin everything for us money grub, – I mean job creators.

    • Hazel

      Thing is, there’s a very good alternative in Lyft which allows tipping, negotiates and settles with municipalities instead of fighting them, and (I’m pretty sure) is still a US corporation paying US taxes. Their executives also don’t blackmail reporters, or make horribly offensive comments about access to women. (Just typed into Google “uber ceo” and the second auto-completion was “uber ceo sexist”, which brought up his “boob-er” comment and other issues.)

      Why do people still use Uber again? I see almost no difference in time to get a ride between them, particularly when many drivers work for both. And all the drivers I’ve talked with prefer Lyft because they get paid more and can get tips.

      • eveee

        Yes. I thought so. But Lyft follows uber rates. And the fundamental economics are the same. Now they cut bonuses to only allow cars newer than 2011 to get them. Do you know of any other profession with no employee protections or benefits, unsafe conditions, and dropping wages, high economic risk, and excess hours?
        These companies are glorified taxis and pizza delivery. Riders are more than happy to have cheap rides in new cars, but drivers are being hoodwinked into jobs worse than Starbucks or Walmart.
        Diners also want cheap meals, and consumers want cheap vegetables and wine. And then there is Cesar Chavez.
        I am sure drivers prefer Lyft to Uber. The devil or captain Bligh. Both are better than a paper route but worse than Starbucks. What has the labor market become when people have to do this to survive. Have we become metal recyclers, Starbucks employees, and part timers?
        Is there little left between that and Facebook employment?

        • Hazel

          Sure, but you don’t need a taxi medallion which can be very expensive, and hours are extremely flexible, so people can do this as a second (or third) job. That people are doing it means the labor market is soft. If unemployment (and underemployment) continues to fall then they’ll need to raise payments in order to get more drivers.

          How is that different from any other industry? And how exactly are drivers being “hoodwinked” – are they promised benefits and then denied them? Would you prefer that they not have these job options?

          • eveee

            It doesn’t work that way. They could care less about the quality of drivers. All they want is a clean driving record. They don’t care about keeping drivers and turnover is high.mthey give big bonuses for new drivers. As long as they can find new ones with the lure of drive anytime, they don’t care. Taxis help by being rude. No competition.
            How are they being hoodwinked? Simple. An average W2 job most understand. Most don’t understand the math of being your own business, but not being able to control rates.

            The rude shares tell them they can make 100k. Baloney. You have to work 50 hours a week and still won’t make that. They take 28%, and the the ride payments are dropping multiple time in a year.

            You get 1.10 a mile on rides and 12 an hour. What you don’t get is steady income. No rides, no pay. When are rides best? At 2am when bars get out. If one messes your car up, you are done for the night, maybe more. Accidents, scrapes, tickets, all paid by you. Average car is 0.60 a mile. If you travel as far to the ride as the ride, you worked for free. You don’t know how long the ride is until you arrive. Anytime on the way to a ride you can be cancelled and have nothing to show. When you turn the app on, you are like a Pavlovian dog. Once it starts ticking, you must answer fast. Too many fails and they kick you out. If rides don’t like you for any reason, they rate you down. They have plenty of time to do that, but you are stuck trying to get away from double parking where they asked to be dropped off. Most riders don’t have a clue that you can be dropped if your rating drops below 4.6/5. Drivers do get dinged for neatness in a brand new car. But if they want to haul pizza and drinks a dog and a bicycle they get rude and rate you down if you ask them not to.

            They don’t advertise any of this, and the gotchas are buried in fine print. If all this appeals to you, please do sign up and start driving your late model car, but don’t use your personal insurance because if they find out you can lose your insurance. Most have rules against using your car to make money. At first there were no proper insurers, so drivers were all operating illegally. Then someone got hurt. Uber bailed on the driver claiming they didn’t cover on the way to pick up a ride. When California legislators found out, they rushed in a law that required ride share to cover it, but in the meantime, ride share picked up thousands of drivers without notifying them that they had an insurance gap. It was a conspiracy between drivers and the cos to say shhhh, and get away with it.
            That is fundamentally the deal with all ride share because of uber and the legacy they set.
            Capitalism at its finest.

            Read all about it.its pretty accurate.

          • Hazel

            And if it doesn’t work for them, they can exit pretty quickly, and keep their vehicle. So… how is this a major injustice?

            I met one driver who had been driving with Uber for nearly a year and was about to buy ten Priuses and hire ten drivers to work with Uber, he must have been doing pretty well. (My cousin got me this ride, it was my first ride share, never rode with Uber since.)

            That brings up another set of issues. Increasing intensity of use of motor vehicles is an energy and environment win, because a lot of energy goes into making vehicles. And the higher miles/year leads to shorter payoff time for higher-cost efficient vehicles like hybrids (see: ten Priuses above), and Bolts (Lyft announcement). It also reduces parking requirements in urban areas. Lyft Line saves more energy by combining rides intelligently, I’d be surprised if Uber didn’t have something similar.

            From my talks with drivers, and some basic facts about the business model (exit ease), it sounds like you’re making a mountain out of a molehill.

          • eveee

            Read upton sinclair if you don’t understand how income inequality and 1% ers are injustice.

            Go drive then please. Seriously, I’m not joking. People like you can’t see the truth until you experience it. Somebody describes it and you can’t believe it. After you experience it, you become like an ex smoker ragging on everyone that smokes.

            Tell me again how a driver that drives 5 miles to a ride, then drives them 1 mile, saves energy. Those people could walk, bike, or take public transit with less environmental impact, too. When uber says they want to help the environment, they are lying.
            The first thing they did was make fares match bus lines to attract riders. Then they jacked the rates. Reducing public transit ridership like that raises emissions.

          • eveee

            Put your money where your mouth is. You can’t say a word about it without experiencing it first. Go drive. Please. Quit whining and sign up. Then you can talk. Until then you can only imagine what its like to use it as your main source of income.

          • Hazel

            Have you been a Lyft/Uber driver?

          • eveee

            Why yes of course. I am not speaking from theory but from real world experience. I have thousands of rides and over 10,000 miles under my belt.
            I have been on rides that were over 50 miles. You would not believe the experiences I have had. Wouldn’t trade for any of it. But the truth has to be faced. Its not a way to make full time money. Or a way of living. Its even dubious part time.
            I wouldn’t be telling you any of this if I hadn’t experienced it personally and had my nose ground into it.
            Tell you what. I will sponsor you for the 750 or 700 they are offering for new drivers. Get the picture? They are that desperate for new drivers. Driver turnover is high. A very low proportion of drivers drive 40 hours or more. The rest drive only part time maybe 20 hours. The lease rideshare cars are 200 a week. Got that? 800 a month. The insurance adds more some with a mileage adder. You can’t make enough money to get by unless you drive an awful lot, much more than your family car. At those rates, you have to drive 30,000 or more miles a year to make decent money. There is an adder in cents per mile for both insurance and a lease car if you go that route. You have to work hard every week just to break even. And if a lease car gets a scrape, or a flat, you are paying for it. The insurance deductible is 500. I paid 200 for a punctured tire. I had to. If I didn’t it was more time wasted not driving while I still had to pay back the lease payment. A 500 deductible costs you. I turned the lease in at 10,000 miles. That was in about 3 months. I got a used car cheap, but had to fix it up to drive it. Now the car requirements are tighter. And fees are increasing with San Francisco adding a $91 TNC fee. Tolls are paid for. But ubers no tip policy and 28% take off the driver is terrible. Lyft was good for bonus premiums for long hours and large ride numbers. That came at the cost of extremely late night hours and all day driving that can take you anywhere. Its a big problem finding bathrooms late at night that are open. None of them are too palatable if you know what I mean. You never know where you will wind up. But now Lyft demands you have a 2011 or newer car to get the bonus, so now drivers are back to 20% take from Lyft. The bonus would give back the 20% charge if you drove 50 hours and a lot of rides. Its not worth it any more because the rates have dropped and a 2011 car will cost too much.

            The word has spread. Driver rates are not as good as they used to be an they have dropped several times in the last 6 months due to sagging demand.
            Rides are harder to come by. In off times, in the wrong place, you can wait an hour and never get a ride. But when one comes you have to drop what you are doing and run. If you want enough rides, you need to keep the thing on for hours and wait. Really screws up your plans. The rides don’t come when you want them. You work when they are there. So it really isn’t drive whenever you want. Its more like, wait whenever you want or drive Fri, Sat nites after 8 PM. Monday at 8AM. And look for weird events to chase riders. Forget 9 to 5 regularity and Saturdays off. You can’t work and make money unless you work Friday and Saturday night.

            The business model only does so much. It is more expensive to take rideshare than public transport, so it only fills the bill for certain things.
            One of the highest demand items for it is picking up drunks, the same thing cabbies do. They are just eating into existing markets, and add a few more. Women like it because they can get a ride in 15 minutes or less, faster than a cab. Drinkers like it, because they can avoid DUI.

            It provides a nice service to riders that can afford a fare higher than public transport and want a little faster ride, but doesn’t provide a good living to drivers. The drivers will be stranded if autonomous driving takes off. Uber and Lyft have already announced their intentions. So much for loyalty to drivers.
            Neither employee nor entrepreneur, drivers are stuck in world without the benefits of either and all the downsides of both. Pay set by someone else that is always decreasing and no benefits or protections.
            You are completely on your own. Good luck trying to contact a human at either company. There is a computer and FAQ list set up as a wall between you and anyone. Feedback may be a day later if that. And trying to find out how to reach someone is just as difficult.
            If they drop you because of a paperwork glitch, you can be out of a job for a week before its fixed.

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