Hailstorm ahead for ride-hailing services in Vietnam

February, 16/2018 - 09:00

The bumpy road thus far for ride-hailing companies Uber and Grab in Việt Nam could well end in a jagged cliff as authorities turn the scanner on their operations, tax practices and competition with domestic taxi operators.

Stop signs for taxi and contract rides on a street in Hà Nội. — VNS Photo Đoàn Tùng
Viet Nam News

Compiled by Phương Uyên

HÀ NỘI — The bumpy road thus far for ride-hailing companies Uber and Grab in Việt Nam could well end in a jagged cliff as authorities turn the scanner on their operations, tax practices and competition with domestic taxi operators.

In the latest bust-up, on February 6 the HCM City People’s Court City began to hear a lawsuit filed by Ánh Dương Việt Nam Jsc, better known as Vinasun Taxi, against GrabTaxi Vietnam Limited Liability Company (Grab).

Vinasun’s argument is that it lost more than VNĐ40 billion (US$1.78 million) in 2016 and the first half of 2017 because of Grab’s Illegal business operations in violation of the Law on Competition.

Tạ Long Hỷ, chairman of the HCM City Taxi Drivers Association, told the court that both Uber and Grab had suppressed local firms.

Grab’s fleet of 28,000 vehicles as of 2017 was the reason why his and other taxi companies had to pull out more than 3,000 cars in HCM City alone from a total of 12,000.

Since January 11 the Hà Nội Department of Transport has restricted Uber and Grab’s operations to certain streets – to match similar restrictions on traditional taxis -- to ensure a level playing field.

Thus, the two companies’ vehicles are not allowed on 13 main streets during certain hours, exactly the same as for regular taxis.

Grab also slapped an extra 3.6 per cent fee on its drivers on top of the old fee of 20 per cent.

Uber followed suit with an increase to 25 per cent from the previous 15 per cent.

Besides, the companies required drivers to pay a 4.5 per cent of income tax, meaning they got double taxed.

But these evoked a hue and cry from their drivers and caused riots in front of the companies’ headquarters in Hà Nội and HCM City. The drivers also refused to ply their vehicles to protest the “unjust” treatment by their employers.

The commotion settled somewhat when Grab reverted to the 20 per cent fee on January 13, but the companies have made no official statement on the matter yet.

Contradictory views

Nguyễn Công Hùng, deputy director of the Hà Nội Taxi Association, said after more than two years of trial runs for Uber and Grab, there are contradictory views on the nature of their business.

He called this lack of clear definition the biggest failure of the trial initiated by the Ministry of Transport (MoT).

According to Uber and Grab’s licences and terms of use, customers’ use of their transportation and delivery services does not confer the status of a transport carrier, he said.

Comparing the tax and other business obligations of the ride-hailing and traditional taxi companies also shows that the two newcomers have the upper hand because of their use of technology, he said.

For example, a traditional transport company has to pay tax of 10-20 per cent of their profits, while for a “technology company” it is only around 5 per cent, he pointed out.

Besides, the field is not level with regard to obligations like welfare contributions for drivers and insurance either, he complained.

He accused Uber and Grab of “behaving and charging” like normal transport companies while enjoying growth unrestricted and unregulated by authorities, distorting competition and resulting in discrimination.

Many countries around the world consider Uber, Grab and others taxi companies, while the European Court of Justice ruled that Uber is a shipping company and must comply with European transport sector regulations, he said.

To many people’s astonishment, the two companies still consider themselves software and technology providers, and for a long time Grab declared its revenue was from "connection software fees".

Thus, both have been getting away without paying value-added tax. 

Last October the Ministry of Industry and Trade had recommended that Uber and Grab should be identified as transport enterprises and not get benefits related to software services.

In December Trần Bảo Ngọc, director of the MoT’s transportation department, had said in a discussion on the Government’s online portal that Grab and Uber act as middlemen who only provide software and do not need to register their business the same way as regular taxi companies, and are thus not bound by the regulations and fees that apply to the latter.

Adding to their already lower taxes, and ultimately unbeatable fares, the two new comers are set to win hands down.

But at a MoT conference last month Vũ Văn Viên, director of the Hà Nội Department of Transport, said he was in the process of advocating the same tax rates and same fares for Uber and Grab as traditional taxis.

The impasse continues.

Free to do business

Nonetheless, some economists and policy experts have taken the side of the two companies, defending their freedom to do business and the benefits customers enjoy.

At a conference on the transportation business in January Nguyễn Đình Cung, director of the Central Institute for Economic Management, had said that the new way of using information technology in the transport business by Uber and Grab is actually a sign of progress in Việt Nam. 

“I would say that taxi companies have the right to protest, which is normal. But I believe the authorities should not forbid [Uber and Grab] from doing business as usual.”

Their growth is as unstoppable as it is fair, he said.

While the two companies indeed disadvantage traditional taxi companies, the latter need to adapt instead of demanding their competitors’ demise, he said.

Bùi Danh Liên, chairman of the Hà Nội Transport Association, said traditional taxi firms have many internal problems that need fixing before they blame the competition for their problems.

The market and businesses are smarter than the State when it comes to actually doing business, so there is no reason for them to beseech the authorities for help, he said.

Trần Quang Lâm, deputy director of the HCM City Department of Transport, said Uber and Grab have been well received by the public, especially for their utilisation of idle vehicles.

Deputy Minister of Transport Lê Đình Thọ had even said on the Government portal late last year that without Uber and Grab traditional taxi firms would never change their ways for the better, and that the ministry would only be responsible for orientation and policy guidance, not for micro-management in what is a free and competitive market. — VNS