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Uber vows to get over legal woes

Drivers for the sharing economy taxi service face big fines for allegedly operating without proper licenses and/or avoiding taxes, but the San Francisco-based firm insists it runs a legitimate business.

Despite a series of stings by the Hungarian tax authorities (NAV), all of which allegedly turned up violations, the San Francisco-based ridesharing service Uber says it is legal and will continue operating here.

“Uber is fully compliant with all tax requirements in Hungary and is proud to be investing in the Hungarian market,”

Rob Khazzam, Uber’s international launcher for Europe, the Middle East and Africa, told the Budapest Business Journal.

“We will stand by the drivers on the platform and support them as we assess the recent NAV report. Meanwhile, we will continue to operate and provide people in Budapest with the same affordable, safe and efficient service they have enjoyed since our launch in November 2014.”

NAV sent out investigators posing as regular customers between May 11-23, and the tax authority reported finding irregularities for every single driver it investigated. The drivers can reportedly expect fines of up to HUF 200,000.

A relatively new firm, Uber lets customers order drivers through a mobile app. Customers preregister by phone with their bankcards, so the payment automatically goes from the bank account of the passenger to the bank account of the driver. The fare is determined based on GPS tracking for maximum accuracy.

As a true “sharing economy” style company, Uber allows its drivers to make some money from their own cars when they have time to pick up fares, though they don’t make as much as local cab drivers.

Uber advertises a base fare in Budapest of HUF 300 and a HUF 130 per-kilometer fee, while the base fare for Budapest taxis was set at HUF 450 with a per-kilometer fee of HUF 280 as per a decree established in September 2013.

Investigation follows strike

This competitive advantage apparently inspired a strike by registered drivers working for traditional taxi companies. Following the mid-March strike, Hungary’s National Economy Minister Mihály Varga said he ordered NAV to launch scrutiny of Uber drivers in Hungary.

Varga added that the “situation can’t remain like this”, claiming that Uber offers taxi services in Hungary without paying the necessary taxes, and drivers are chiefly working in connection with a firm in the Netherlands. Varga added that these drivers offer services, but lack the professional registration needed to offer such services.

The violations alleged by NAV’s May investigations included drivers having no tax numbers and giving no receipt after the ride was completed. NAV also reported that cars had no taximeters, drivers provided no invoice of the payment, and the drivers did not have taxi licenses.

The whole point of Uber is that the drivers don’t need to be professionals and that they can afford to work cheaply. But according to Khazzam, the system can still comply with Hungarian laws.

Indeed, Uber drivers generally give paper receipts if requested to do so, and their transactions are recorded in their bank accounts, so they could presumably be tracked for tax purposes.

The lack of professional chauffer certification for drivers might be a more difficult problem for the company to solve, but Uber is open to discussions with Hungarian stakeholders “about a regulatory framework that would strengthen the benefits that ridesharing services such as Uber can bring to Budapest,” according to Khazzam.

“It is important to remember that services such as uberX, and the sharing economy more generally, are empowering citizens across Europe with new and flexible economic opportunities,” he added. “All stakeholders, at the local, national, public and private level, should cooperate to ensure these services are regulated and also allowed to develop for the benefit of our cities and citizens.”