The fact that they weren't paying GST is mind-boggling. The purpose of the exemption is to let someone running a tiny hobby business sell their products without having to deal with tax headaches.
The purpose of the exemption was never to let a mega-corporation take the exemption of each employee, multiply it by the number of employees, and pretend that they don't need to pay tax.
What next? A grocery store taking the $30,000 exemption for each employee working for it? A law firm taking a $30,000 exemption for each legal aide working on a case?
Yes, in fact that is how it works. If multiple independent contractors work for some firm, they each get their 30,000 exemption (if eligible) as individual sole proprietors of their individual businesses. They have their own business numbers and GST accounts which are considered individually.
Contractors are considered employees in some ways and not in others. This is mainly under labor ("labour", here in Canada) law which is there to protect workers from being exploited by being reclassified as contractors. Like you can't ask people to work in shit conditions just because they are contractors, and such, or deny them a lunch break.
The firm still collects GST though. It just doesn't need to pay GST to it's contractors. In practice, the firms net finance shouldn't be different regardless of whether they have employees or exempt contractors.
Consumers contract with Uber, and pay Uber. So from what I can see, Uber should be collecting, for itself.
Except for the fact that the GST gets remitted to the government, instead of to Uber. Your suggesting is an 5-17% reduction in margin, dependent on province.
Either way, collecting GST on a sale is the norm in Canada, regardless of what happens on the back end.
Ok, you can fault Uber for TONs of things. Moral, financial, ethical, political, legal, but one thing they did indeed do is provide "actual productivity improvements that make lives better".
I am an Uber/Lyft user and my life has been drastically improved!
Uber drivers are not employees. They are independent contractors. Uber, as part of their service, collects money from riders, giving both the rider and the driver a comfort factor as they don't have to deal with cash. As "hobby" businesses they each individually were enjoying the exemption. Now they will not - because we can't have "hobby" businesses causing discomfort to the well connected.
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.
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.]
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.
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.
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:
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.
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.
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?
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.
>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?
> 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.
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.
>>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.
I download the Uber app, Uber finds me a ride, Uber sets the price, Uber charges me, and I pay Uber. Uber should be collecting GST/sales tax. I don't understand how else you could look at it!
Uber is essentially doing the same thing here in Australia and the courts are getting involved to make a ruling.
This is, IMO, the best way of looking at it. Whether or not Uber's drivers are employees is a completely separate matter and your point stands regardless.
The consumer is paying Uber. Whether Uber uses employees, contractors, clockwork automatons or aliens to provide their service is irrelevant.
It's a little different in Australia. The GST registration threshold is $75,000, but there is a specific carve out for taxis that forces registration/collection of GST for taxis regardless of turnover. The ATO (and now the Federal Court) aren't challenging the contractor/employee position of Uber - rather just that the individual drivers should be collecting and remitting GST on their fares.
The same thing applies to Manpower or any temp agency.
"I call manpower, manpower sets the price, manpower charges me, and I pay manpower!"
Except in that case temp agencies are clearly employing contractors, and thus don't have to pay GST.
Not everything is black and white. If they were, the government would easily have been able to block their actions. Right now they're trying to figure out what's going on and charge them appropriately.
If I staff my grocery store with contractors, can I claim a $30,000/contractor tax exemption too?
The intent of the law is pretty clear - serious businesses (That do more then $30,000/year in sales) are expected to pay taxes. Small ones are not - because of the small amount of tax revenue, and the high burden of compliance for individuals.
The cost of compliance for Uber is trivial. It's a bloody app, for Pete's sakes.
Right, so if you buy a book from Amazon, and then pay your credit card bill a month-something later, that means Amazon and the seller are employees of Visa. Wherever the end-user sends money is the employer; that's it.
They already support collecting HST (drivers who make more than $30k have to). Occasionally I take a ride and see HST on the receipt, but most are dodging it.
Can a building contractor wear whatever they want, like a ball cap instead of a hard hat and sneakers instead of steel toe boots?
Can a software contractor code in any programming language and on and operating system, whether or not the client uses them? Can he or she flout the HR policies, while on site?
There are regulations about what people involved in construction have to wear while they're working. It's not the contractee's sole discretion in that case. But if you're an independent building contractor and you want to come to work in sequined coveralls then sure?
A software contractor can indeed work in whatever they want, but the contract may stipulate some things about that and not doing so would be breach of contract. Obviously a contractor is bound to the terms of their contract.
In this case the analogy is the contractor using their own computer and software to manage their work process, not terms of what the work product is.
Likewise, if they're not an employee and their contract doesn't stipulate anything about behaviour on site than I would expect them to follow the law rather than policies they never agreed to... Is everyone entering a workplace subject to HR rules they've never even seen?
The Canadian Revenue Agency seems to think that I should not do that. They also seem to think that traditional taxi companies are also not eligible for this exemption.
That is right. The law in Canada explicitly excludes taxis from the $30k exemption, and taxis must collect gst/hst on all rides, regardless of how much the taxi's sales were in a year. Uber was exploiting this rule by saying their services weren't 'taxis', and each driver was independent, and therefor that rule didn't apply to them. It's a sneaky way to charge most people 5-15% less than their taxi competition.
Source on the CRA not allowing cabbies to be contractors? Because as far as I know they almost universally are. Either to the owner of the cab they drive or to the dispatcher.
Ironically, this is something cab companies probably don't want. It'd be cutting off their nose to spite their face. Most cabbies are also contractors and in fact pay to use the cabs they drive on a daily basis.
It would wreck the cab industry if dispatch companies (to which cabs are exclusively tied) had to make all their drivers employees.
And good riddance, the cab industry has long been problematic in its own way, with its own worker abuse issues and non-competition problems. Disliking uber doesn't mean supporting cab medallion owners.
> because we can't have "hobby" businesses causing discomfort to the well connected.
When this sentence is used by the well-connected elite of the best-funded region in the world, somewhere, the world's tiniest orchestra plays a sad tune on the world's tiniest instruments.
Uber is like a builder who hires contractors. The builder's revenue is >30 k CAD therefore they need to collect and remit GST.
If some of the contractors were to make less than 30 k per year, then they don't need to charge GST, regardless of who the builder is or the size of the projects they work on.
The "end user", the person paying for the house, deals with the builder, hence pays GST.
If you say you'll build me a website for $100, and I in turn contract that out to some guy in India, I'm still required to charge you $100 + $5 GST. The fact that I didn't use an employee to provide the service is of no issue.
It's right to close the loophole that really should never have existed in the first place, if not for industry lobbyists.
Uber drivers are absolutely employees. They might claim that they are independent contractors, but they are not independent contractors. The law doesn't just say 'you can decide that your employees are contractors if you want to'.
One interesting note about the press release to the Canadian newswire service, it highlights that Uber was confounded by Canadian Garret Camp.
This is set to go live on July 1st so I guess you can watch the data from that point on to see if it has any effect.
> The budget statement estimates the change will raise C$3 million in new revenue in the 2017 budget year, rising to C$5 million in the next few years.
So this isn't really about raising money as $3 million is figuratively a rounding error.
it highlights that Uber was confounded by Canadian Garret Camp
s/confounded/co-founded/cg
Sorry for the nit-pick, but in this case the word confounded had me genuinely confused about what this special interest group, Canadian Garret Camp, is (are they angel investors? some sort of VC incubator? a front-group for taxi companies?), and why they were lobbying for removing Uber's GST exemption.
Instead of making it harder to be an Uber/Lyft to match Taxis, why not make it easier to be a taxi? Driving someone around shouldn't be so complicated.
Regulation, when necessary, is good... but most of what I see around taxi regulation is just money gouging on the part of the state.
You cannot make it "easier enough" to satisfy Uber. New Zealand requires only that you have a P endorsement to your license to be a commercial driver. That requires a police background check and a medical certificate. Uber refuses to comply with that minimum requirement.
The NZTA are prosecuting because it turns out that, surprise surprise, Uber are hiring drivers with serious criminal records or who are medically unsafe to drive.
Does the safety somehow diminish when you pay for the ride?
If I give you a ride to work, for free --- then give you a ride to work, but you pay me, what is the functional difference requiring more regulation on the second part?
Is your safety affected any different? Aside from the basic protections built in to any business when it comes to collecting money, etc, what extra rules need to be in place.
From a purely pragmatic standpoint, what is different about the experience that requires all the extra crap?
For example, in many cities where they were losing the legal fight, Uber offered free rides... and were legally allowed to do so, because they weren't charging the customer. Explain to me what was different in that scenario that made it any safer for the passengers?
If I give you a ride to work, for free --- then give you a ride to work, but you pay me, what is the functional difference requiring more regulation on the second part?
Is your safety affected any different? Aside from the basic protections built in to any business when it comes to collecting money, etc, what extra rules need to be in place.
In the first instance, both parties can refuse, and can drive in any way they want. One-off rides (or paying for part of the gas in a carpool) aren't much of a worry. This is basically as safe as driving yourself somewhere. Of course, they could be a really bad driver with minimal insurance, so hopefully nothing bad happens. In addition, in these situations, you are usually on a friendly basis with the person - minimally a coworker.
Your safety is different when you start to ride with someone that does it for a living. You don't know the person, so you are trusting they know what they are doing and can drive in a way that is safe for you. The more folks drive, the more likely they are to be in an accident (this is why insurance increases with your commute). Minimally, they need to know how to combat this. I'd prefer them to have a more comprehensive driving test, including things like passenger safety and minimal regulations on driving record/background check. Unlike your friend, I'm pretty sure a taxi service has to have adequate insurance in case of an accident. Many places also have policies about pricing because of shady pricing policies in the past.
While the more you drive would statistically make you more likely to get in an accident, that still doesn't affect passenger safety. You can argue that the more you drive, the safer you drive, as well. The more experience you have driving, the more inbuilt habit/reaction you have as body memory.
The more you ride would be what affected passenger safety.
"You can argue that the more you drive, the safer you drive, as well. THe more experience you have driving, the more inbuilt habit/reaction you have as body memory"
I used to think something similar, but the truth is that the problem with professional driving isn't one of experience, but things like driver fatigue [1]. All things being equal in driving skill, the "normal" driver generally drives safer than the professional.
Ok, so what laws that are in place do anything to control the speed of the driver (Aside from laws that would apply regardless of driving for fee or not)
Taking someone somewhere against their will is already illegal, which of these extra laws (and taxes) prevent that?
The result would be the same in either case - the driver would be held accountable for, basically, kidnapping and extortion, and you'll be left either short more money or stranded 60 miles out of town. A regulation in place isnt going to prevent someone from doing that. Regulations would have no impact on that case.
>Taking someone somewhere against their will is already illegal, which of these extra laws (and taxes) prevent that?
For the same reason that regulations help in all sorts of areas; you pre-vet the people authorized to do the service to reduce the likelihood of this occurring. It's exactly the same as regulating doctors, lawyers, financial planners, truck drivers, teachers, daycare workers etc, etc, etc.
The Canadian government realized it could increase​ taxes by appealing to moral outrage, with terms lime "tax advantage" and "loophole". End the tax advantage by lowering taxes and reducing the size of government? Out of the question.
I didn't claim it does. Reducing the size of government decreases the amount of money the government needs to operate without incurring additional debt. If the government were less expensive to run, officials wouldn't need to invent new ways of taking money from the people.
Using the small supplier exemption seems really doubtful to me. That pushes the tax collection liability on the driver (who can't collect taxes, since payment is through Uber app) and the limit for that is 30k$ so a lot of drivers should probably have charged taxes since they may have earned more.
In addition, my understanding (not a tax/law person) is that the 30k$ would be for the whole fare, not the driver's cut.
GST rate is 5%... But provincial sales tax could apply, at least in provinces where there is HST (Harmonized Sales Tax, administered by fed gov, divided with province.) HST varies from 13% to 15%. I wonder if we'll see provinces going after the drivers for back taxes. Revenue Quebec is notoriously aggressive in going after people for sales tax.
> That pushes the tax collection liability on the driver (who can't collect taxes, since payment is through Uber app) and the limit for that is 30k$ so a lot of drivers should probably have charged taxes since they may have earned more.
Sounds like Uber needs to update their app.
> I wonder if we'll see provinces going after the drivers for back taxes.
I'm sure Uber will do the responsible thing, stand by its drivers, and make them whole in the case that they are billed for back-taxes.
I like using Uber. But I also don't like the idea of money flowing out of the country/province/city into Silicon Valley. I'd much rather that the money earned by Uber stays within Canada in some form such as a tax or investment by them into our region.
Particularly because Uber-like apps are becoming important to public transportation infrastructure. Additionally, taxi revenue coming from tourism remains in the hands of Canadian taxi companies as opposed to Uber resulting in a net positive flow of money into the country.
Sadly it doesn't address any of the problems with cabs in Toronto.
1. Cabs won't take credit cards by claiming "the machine is broken" when it's not, presumably so that they can avoid reporting tips or fees, or they might just skim your card.
2. Cabs are too expensive.
3. Cabs might not even take you if they figure the ride isn't worth it.
This app doesn't allow you to pay, so doesn't help 1. It actually make 2 worse by charging you $2 just to "hail" a cab with it. I mean, seriously? And it doesn't help with 3 either.
> 1. Cabs won't take credit cards by claiming "the machine is broken" when it's not, presumably so that they can avoid reporting tips or fees, or they might just skim your card.
I find more cabs don't use that excuse now since Uber has been breathing down their necks. Also, since you mention Toronto, there's the Beck Taxi iOS app. With it you can pick the pickup location, destination, hop in the cab, and when leaving the driver declares that the trip is over which charges one's PayPal account. It's not as cheap but if someone wants to use cabs over Uber based on principle then there other convenient options.
So they seem to get the hailing part but at a cost. Like you said, this doesn't solve the friction in payment. I would prefer something like venmo as payment option (debatable on distribution of fee, etc.). Something like pay to register for drivers and a monthly fee option for reduced pay for frequent users would be good for sustainability.
That's not too surprising. Though I will say that NYC cabs are pretty ok, at least I never have to worry about being able to pay with a credit card and they are actually cheaper than Toronto cabs, which really says something.
What I would have preferred is that Canada removing the burden off the taxi companies and let them give competition to Uber in innovation space instead of trying to bribe politicians to act as gatekeepers.
Have you ever been to Bangkok? I can just pay $1, hop on the back of a moto idling outside the skytrain station, and off we go lanesplitting through traffic straight to my office 2km away.
It's amazing and would be so illegal on so many levels in Canada (where I spend $1000/mo on transportation).
I don't follow. It only cost $2 a day to take the moto taxi between the office and the Skytrain. What kind of moto can you buy for $60-$120? And that's not taking into consideration parking requirements and the extra time it takes to drive all the way from home instead of doing most of the distance on the Skytrain.
Where I live, Uber charges less than half of what cab companies charge. But there are other ancillary benefits. Uber could be at parity with the cab companies but I would still prefer it because of:
1) Their app
2) The reliability of getting car with them vs. waiting for a cab.
3) Their vehicles are much, much, much nicer than cabs in my area.
4) The purchase experience.
Yeah, that's always been one of my points: existing cab fares are probably already close to the the price to sustain a business and pay a living wage.
Like you said, cab drivers (and probably cab company owners) aren't exactly fatcats. Meanwhile what's Travis Kalanick's net worth? How much are they paying top engineers at Uber?
Don't get me wrong, there's definitely corruption and protectionism in the existing taxi industry, but I fail to see how the low $5-7 fares are anywhere near sustainable. Is the revenue from surge pricing enough to offset the current discount?
I don't like to assume anything about the wealth of professions when I do not know the economics of their industry. I have seen a lot of businesses over the years that I assumed were barely scraping by that were actually making a killing.
Aren't cab drivers in major cities dealing with the purchase or lease of million dollar cab medallions? I believe that could factor into higher prices for consumers.
Yeah, how dare them offer a service both riders and drivers were happy using and helped hundreds of thousands poor make more money. Wilful adults entering mutually beneficial agreements? Government can't allow that insanity. Quick! Let's regulate it to death to make sure it sucks as much as what we had before. Make sure to justify it on taxes, people will buy the narrative and blame it on the evil corporation and not on the innocent incorruptible government.
> Slowly the price advantage that Uber has by using loopholes fades away.
They don't even always have a price advantage anymore, especially if there's a surge. I needed a cab from Chicago Midway to my hotel last night, Uber's upfront price was $48 (and an eight minute wait), a regular taxi was $40 (including 15% tip) and no wait. I took the latter.
In my experience, whenever Uber is surging enough to make cabs cheaper (2.5x in my city), there are no cabs to be found. That or the cabs try to scam you by asking for extra cash off meter (happened to me on New Year's Eve).
because taxi drivers cannot, at least where i live, by law, change their fare. uber/lyft told me (and i agreed by using their service) they would change the fare based on demand.
Why not just cut GST for everybody? Instead of taxing Uber more, tax taxis less. Drivers and Uber still pay income taxes, fuel taxes, relevant tolls right? If they want to simplify taxes -- as they claim, the best way to simplify is simply to eliminate.
Lower fares mean more revenue for drivers and Uber and thus more income taxes collected. Removing taxes from goods, means lower prices which means you sell more and then generate more tax revenue. Laffer Curve 101.
It's possible if there's significantly higher utilization to offset the decreased cost. Today a significant portion of the driver's time is waiting around doing nothing.
Companies that collect GST also get back from the government any GST they spend. So effectively they don't have to pay for GST/HST on fuel, maintenance, even a new car. Companies that don't collect GST/HST (people with sales under $30k, exempt service providers like doctors, etc...) cannot claim any input tax credit and have to pay it just like regular individuals.
The real issue here should be the abuse of the small provider provision 'hobby' tax code exemption for businesses netting <$30K that provide ride sharing.
Uber should fail on both of those counts, but instead the law is changing to end that exemption. This appears unfortunate to me as we could use continued innovation in the ride sharing space.
<parody>The new national budget unveiled Wednesday by Canadian Prime Minister Justin Trudeau's Liberal government took aim at document processor providers such as Microsoft Word [MSFT], to force them to collect the goods and services tax (GST) on every document created using their software. Trudeau stated, "(The Royal) we are quite disappointed that many attorneys and other value-added providers within Canada are creating documents that result in multi-million (Canadian, but still...) dollar settlements without a tax being gathered on the value those documents add to the case. Why, individual attorneys can download this software right from Microsoft, create documents worth a fortune to their clients, and not pay us a (Canadian, but still...) cent for the use of that software! Each attorney and complainant ends up having to pay us directly, and that creates awareness and complaints from taxpayers - tres horrible, I say.".</parody>
Uber is essentially just a matcher and payment processor that takes a cut, they don't own vehicles or employ drivers - will they only have to pay taxes on their cut?
The consumer pays Uber. That is the point of sale. That is where the sales tax is collected. This isn't rocket science.
To your - bad - analogy: If MS was selling templates created in word by you to a marketplace, you can bet that GST would be paid on them by the consumer to MS.
Yup. And if you, the template provider, had a GST number (you are a business or have sales over $30k), you would also be charging Microsoft the GST for the sale. It is not a problem for MS since they would just claim it back as an input tax credit and it would be net zero for them.
Consumer pays GST to MS. MS pays GST to a GST collecting template provider. MS and template provider both pay GST to government, but MS gets an input tax credit for GST paid to template provider so that government doesn't double dip.
This is what uber should be doing with their drivers but they prefer to have prices 5-15% lower than their competition by applying their own legal interpretation to Canada's tax laws.
This is basically what happens on the Apple App Store, except that Apple submits the GST directly to the government on the behalf of the app creator. On paper it's the same as your example, it's just the GST money never actually goes into the account of the app creator.
>Uber is essentially just a matcher and payment processor that takes a cut, they don't own vehicles or employ drivers
That's the story their PR spins. Luckily they don't make the laws.
You think this idea of, "He's not my employee, he's a contractor!" as a way to avoid employer obligations is new? That's a laugh, and it's the reason these laws exist.
But it's the truth - those Uber drivers don't get guaranteed work, they don't get hours, they don't get salary. Instead they find contracts via Uber and they keep their portion of the earnings. Just because Uber takes the payment makes them an employer? If Uber had the drivers take the payment and pay them out later would they not be an employer anymore?
Seems like the exact definition of a contractor to me. I don't know how else you could define it really.
Are uber drivers allowed to be Lyft Drivers or regular Taxi drivers? If so, you have a good argument that they are not employees. If not, they will be seen by the CRA as employees, regardless of anything else in place.
If they are not employees, drivers are obliged to collect GST from Uber for their services if they earn more than $30K. If Uber re-sells that service, they are also obliged to collect GST from the end user. They can claim an input tax credit on the contractor's GST to offset. This is normal business operation in Canada, and one of the main reasons the HST was so popular - it moved all the multiple people charging and remitting taxes to one spot - the end sale.
If Uber's contractors are determined to be employees, that's a major issue for them, because at that point they have a ton of CPP and EI to pay that they have not been doing.
Really, they don't have much of an argument here either way. There is no real reason they should be tax exempt.
The purpose of the exemption was never to let a mega-corporation take the exemption of each employee, multiply it by the number of employees, and pretend that they don't need to pay tax.
What next? A grocery store taking the $30,000 exemption for each employee working for it? A law firm taking a $30,000 exemption for each legal aide working on a case?