Saturday, February 21, 2015

How does the Uber economy work?

The San Franscisco Chronicle ran a story yesterday entitled Here’s why Uber and Lyft send drivers such confusing tax forms in which they discuss the tax-related oddities surrounding Uber-type arrangements. In brief, these companies send drivers various forms, showing various unexpected amounts, and many drivers are terribly confused about what is going on. What's going on is that Uber and Lyft and so on are probably engaged in an elaborate dodge of both tax and labour/employment regimes.

I think it is fascinating that new economy firms are actually returning us to an old economy model, in which everyone is an artisan hunting for a daily paycheck. Planet Money had a story on the first employee recently that draws the picture, worth a listen.

If Uber drivers are employees, then a whole host of tax and other regulations apply. If they are independent contractors, then some different rules apply. But what if they are neither, and Uber is simply a rider/driver matchmaker and payment facilitator? This is a service that can be provided from anywhere in the world, and perhaps even makes the most sense from an international finance center. The international tax implications are intriguing.  More to come on this subject.


  1. CRA interestingly enough has a new section of their website directed towards this very subject.

    CRA is now mandating ALL taxi and limousine drivers register for tax purposes implying that the less $50,000 CAD exemption from GST registration DOES not apply to taxis and limousines.

    From CRA below:

    If you are a self-employed taxi or limousine driver in the taxi business, you must register for the GST/HST. You are usually self-employed if you are in one of the following situations:
    •You own your taxicab/limousine.
    •You lease a taxicab/limousine from an owner for a flat fee, either on a daily, weekly, or monthly basis.
    •You lease the taxicab/limousine from an owner for a percentage of fares.

    If you are not sure whether you are self-employed or an employee, you can request a ruling to have your status determined by using Form CPT1, Request for a Ruling as to the Status of a Worker under the Canada Pension Plan and/or the Employment Insurance Act.

    As a registrant, you can generally claim input tax credits (ITCs) to recover the GST/HST paid or payable on your business purchases such as gas, car repairs, and car washes.

    As the CRA mentions above business expenses are eligible for ITC's and writeoffs. Still I am curious as to whether this is new legislative or administrative authority on the part of CRA or have these rules always been in place. I have not noticed any recent changes to the Excise Tax Act in this area.

    1. excellent, thanks for drawing my attention to this.