The Taxi Project 2.0 has announced a court action today against Uber for tax fraud, in the latest offensive by the Taxi workers’ movement in Spain against the platform giant. The Gig Economy Project reports.
Ben Wray is a freelance journalist leading BRAVE NEW EUROPE’S Gig Economy Project. He also produces a morning newsletter called Source Direct on Scottish politics, which you can sign-up to here: https://sourcenews.scot/mailing-list/
This series of articles concerning the Gig Economy in the EU was made possible thanks to the generous support of the Lipman-Miliband Trust
In a landmark case, Taxi Project 2.0 made a claim to the Spanish Public Prosecutor office that Uber had defrauded the Treasury of more than 5 million Euros.
The case was announced today, 20 March, via an online press conference by Alberto ‘Tito’ Álvarez of the Elite Taxi Association and Taxi Project 2.0, a project to defend the interests of the taxi sector.
They are being represented by the law-firm Vosseler Abogados, and are pursuing the case based on a detailed report into Uber’s elaborate corporate structure by the Ekona economic innovation co-operative.
The roots of the claim can be traced back to a ruling of the European Court of Justice in 2017, also brought forward by the Elite Taxi Association, which found that Uber was in fact a transport company, and thus should pay tax on that basis.
The claim of Taxi Project 2.0 is that it has been not doing so, and instead has been funnelling money made in Spain to its Dutch arm Uber BV, which is capitalised with 1 euro and has just 48 employees. The money is then channelled “to Delaware or similar subsidiaries in places like Bermuda or Singapore,” Ekona finds.
Uber has 60 subsidiaries in the US and more than 75 in the rest of the world. Many of these shell companies have no employees, and, according to Ekona, are a typical example of how global multi-nationals seek to hide tax liabilities.
Delaware is a US based tax haven, containing more corporate entities than registered individuals. Lanny A. Breuer, a former Assistant Attorney General for the Criminal Division of the U.S. Department of Justice, has said that Delaware shell companies “are the number one vehicle for laundering illegal money and facilitating criminal activity”.
One study found that the company’s which set-up legal entities in Delaware save themselves on average between $3.2 and $4.2 million per year.
In the specific case of Spain, Uber’s income is “disguised as compensation for its digital services” and sent directly to Uber BV in the Netherlands.
“Categorising all income as payments for intellectual property is equivalent to an accounting trick to transfer the money out of Spanish territory, thus incurring fraud and possible tax offences,” Ekona claims.
Uber’s Spanish firm, Uber Systems Spain S.L.: “Only receives income from its parent company in Europe for payments for various services, so that its profit and loss account does not reflect at all the activity of the Uber group in Spain, and therefore pays practically no taxes to the Spanish tax authorities, as its profits are almost non-existent. In fact, in 2017 it declared profits of only 163,500 euros, with revenues of 2.9 million euros. In the same year, Uber Systems Spain SL paid 53,817 euros in corporate taxes.”
The figure of 5.1 million Euros in defrauded tax income is derived from Taxi Project 2.0’s analysis of Uber’s Spanish data to work out the revenue the company generated in a given tax year, accounting for the number of rides and the average cost per ride. Uber has not paid corporation tax or VAT on this activity in Spain. The 5.1 million figure is solely for the financial year 2018; Uber has been operating in Spain since 2014, therefore their Spanish tax liability could infact be significantly higher.
The case could set a precedent for tax claims on digital platform giants operating in several EU countries. Apple was fined 13 billion euros but it was not a court ruling, it was a fine imposed by the European Commission. Other EC investigations, such as Starbucks in Netherlands and Fiat in Luxembourg, appear to have stalled “partly due to pressure from business groups that have benefited from this tax laxity”, according to Ekona.
Ekona believe Uber to be a major destabilising force in the European transport sector. Describing the firm as “one of the most emblematic examples of a bubble” due to its consistent lack of profitability, it is the only one of the Sillicon Valley ‘unicorns’ to have losses for more than five years concurrently.
The company’s strategy of growth before profits, to try to establish a monopoly position in transport by forcing out competitors and deregulating the sector, is “the typical modus operandi of a speculative bet or investment to which little importance is attached to the real benefits that the company can generate in the productive sphere and its long-term stability,” Ekona find.
Part of that strategy is about seeking to gain an unfair tax advantage over competitors, but they now face a battle on that front from Taxi Project 2.0.
“We are organising to defend ourselves,” Tito Alvarez says.