Harmonise taxation on incomes of cabbies, private-hire drivers

The introduction of the Private Hire Car Driver’s Vocational Licence signifies the regulator’s effort to place cabbies on a level playing field with private-hire drivers.

Disparities still exist, however, including private-hire car pick-ups and drop-offs not being permitted at taxi stands and not being allowed to carry children below 1.35m in height, unless equipped with child restraints.

These have been debated, with responses from the regulator.

One area, however, has not been given sufficient attention: Income tax treatment for private-hire fares (Drivers association calls for fair taxes; Sept 20).

I appeal for changes in the tax law, for private-hire drivers to be treated more equitably by not precluding most private car expenses as tax-deductible items.

Taxi drivers, in arriving at taxable income, may claim the rental fee, parking fee, fuel and other running expenses (for example, car wash) as tax deductible. On the other hand, private-hire drivers are allowed to offset the levy and administrative fees payable to Uber and Grab.

One suggestion is to align the taxation on private-hire drivers’ income with that on cabbies’ income. The authorities, however, might be reluctant to do so.

Firstly, it would contradict the policy of discouraging private car ownership. The second reason is the risk of some form of tax sheltering.

Of course it is possible to make taxpayers maintain separate books to identify private-hire rides versus rides used for, say, house viewing.

But this is tedious and could cause errors on the part of taxpayers and audit issues for the authorities.

I therefore suggest a fixed rate of deduction against gross fares.

A percentage of the gross fares would be a proxy for the expenses incurred to produce the fares.

The benefits include tax harmonisation between private-hire drivers and cabbies, a more equitable basis of taxation for the former and a less cumbersome methodology. For example, a driver earning a gross fare of $24,000 could be granted a 30 per cent deduction — $7,200 — without the need for itemised expenses.

It mitigates the concern about tax sheltering and is not without precedent. Similar concepts apply to property rental income whereby a percentage of expenses are permitted without the granular details being required.

The authorities may ponder the question of what percentage is reasonable. As a rule of thumb, 35 per cent would be equitable.