With a certain degree of exaggeration, it can be said that where Uber is, there is also fire on the roof. Drivers in traditional taxi services are having difficulties coping with the presence of the Uber drivers. Legislators are seeking ways to regulate this service in such a way that both parties are able to „sit at one table”.

Shared transport in the Czech Republic: Regulation, obligation and inspiration abroad

Is Uber a taxi? Uber offers an alternative to a classic taxi service. The original concept of the service rests in the fact that whoever has a car and a driving licence, he/she can become a contractual driver. The Uber application then connects requirements of clients with offers of drivers in a real time.

Shall we need new legislation to regulate the sharing economy? The sharing economy services, including Uber, stirred up calm waters in the relevant service segments during their operation in the Czech market. Regulation had to respond to their frequently rapacious business model in the majority of cases. The legislation, however, is not always able to fully predict the development of modern technologies and therefore it is necessary to respond to changes in society by means of a clear interpretation of the current legislation or the amendment thereof, if the interpretation is not sufficient.

How does the Czech Republic regulate the issue of shared services? Our legislation defines the rules for doing business, granting business licences, collecting tax etc. Laws do not necessarily have to stipulate all thinkable numbers of situations to which they apply (this in many cases cannot even be predicted). It is essential whether the laws are interpreted in a uniform and clear way, either by courts or administrative bodies. In the Czech Republic, the interpretation of sharing economy has not yet been formed.

The Court of Justice of the European Union determined that the same rules should apply to the Uber service as those applying to any other taxi service. What does such a ruling mean for the Czech Republic? The Czech Republic as an EU member state should act in compliance with EU law and respect the rulings of the Court of Justice of the European Union.

What obligations arise for the drivers from operation of the Uber service? According to the opinion of the Tax Administration, in the Czech Republic, everybody who provides transport services via Uber should pay a VAT from this activity (if his/her annual income from the transport is over one million Czech crowns) and also personal income tax and road tax in respect of the vehicle which the Uber driver uses. He/she should also pay social and health insurance contributions. In the calculation of a tax base, he/she can deduct from his/her income demonstrable costs which are necessary to achieve the income or costs calculated from the income on a lump-sum basis.

COMPARISON: How is the shared transport regulated in the world?

• Belgium, Italy: special laws regulate the sharing economy to enable its other development (especially, barriers blocking entries into the branch are reduced) and, at the same time, ensure effective consumer protection. They apply a lower tax rate to the income from sharing when compared to another business activity.
• Some Australian states have made Uber and similar providers of co-drives legal and paid compensations to taxi-drivers for the licences that they had bought earlier.
• Estonian tax administration is connected to the IT system of Uber that provides data regarding transactions of its contractual drivers. These data are then put into pre-filled electronic tax returns of these drivers and will facilitate to impose an adequately tax to Uber as such.
• Spain: in August 2018, Spanish taxi-drivers terminated a strike for legislative restrictions in issuing licences for alternative taxi services (Uber, Cabify etc.). They required that competences in issuing licences passed to autonomous regions. The Ministry for Development promised to stipulate this in legislation by September 2018.

Transport: Pros and cons of the sharing economy

Extension of the sharing economy can have an impact on the improvement of the quality of services of traditional providers. Moreover, a number of current shared services may develop. An example is UberEats (food delivery service that should be launched in Prague in August 2018) or UberPool (co-drive with persons going in the same direction). Thus companies may ensure new sources of income and stabilise their income through diversification. Moreover, innovative elements of the sharing economy are also adopted by “traditional” business. For example, BMW offers sharing its vehicles via the service DriveNow in large Western European cities.

By sharing cars, their unexploited capacity can decrease. Reduction of the car fleet may occur that would manifest itself by freeing the public space but, at the same time, demand for cars could decrease, resulting in a drop in automotive production. Thanks to car sharing, lower income groups can also get access to a car or more luxurious cars they cannot afford to own but can rent.

The sharing economy can also influence other business areas. A decrease in the number of clients is suffered by the hotel sector, due to the Airbnb service and other platforms.

Who is active, sets the direction
The demand for shared services will probably increase in hand with smart technologies. The way is not to fully subject it to the current legislation – economic benefits and its potential would thus be threatened.

Pressure on the need for regulation developed by legislative bodies will be more intensive rather than weakening. Shared service providers should actively response to the situation and propose a solution. This might be the way in which both traditional and innovation services can find a common language.

Are you interested in the sharing economy in numbers and areas other than the shared transport services? Please, read the Deloitte study Sharing economy. Wealth without ownership (in Czech only).