Home Global Village Provincial governments preventing Careem expansion

Provincial governments preventing Careem expansion

preventing

News Analysis |

Punjab Revenue Authority (PRA) has tightened its grip around the ride-hailing companies Uber and Careem in a move to bring them under national tax net and has summoned replies from both to be submitted until December 19th. PRA has also warned both companies against slapping hefty fines under clause-48 of PSTA’s serial number 5 (Public Transportation)

Despite earning revenue in millions, both Uber and Careem are using delaying tactics and causing hefty loss to provincial exchequer by evading tax, PRA informed.

Owners of the cars would be required to obtain fitness certificates for the cars. Route permits would be needed before the cars can be used as taxis, he added.

As per the details, PRA had issued multiple notices to aforementioned companies under Section-57 (2) of Services Act-2012. PRA had directed Uber to submit details of audit accounts for financial years 2015-16 and 2016-17, bank accounts’ statements, details of drivers working with the companies and details of fare amassed from customers whereas similar notices had also been issued to Careem.

Uber in its written reply to PRA’s notices took the stance that the company had initiated operations in Pakistan on 26th of July 2016 under Taxi Services Companies Ordinance 1984 thus implying completion of first financial year on 30th of June 2017 and audit for the same is underway. The company has sought more time from PRA to submit detailed reply in this regard.

Read more: Moving in reverse: Careem launches bike service after Car and Aeroplane…

On the other hand, Careem in its letter to PRA said that they had moved court on tax-related matters whereas the company was not incorporation in the fiscal year 2015-16.

Sources close to PRA, told a publication that both companies have been collecting various surplus charges such as starting, moving, waiting and peak factor like tariffs from customers, thus there exists no harm in implementing 16 percent sales tax on these services.

When asked to share details on the new plan, Saif said it will be modelled around taxation regimes for such companies in Malaysia, Egypt and Indonesia where they are treated as “network service providers”.

This move came immediately after reports had started pouring in about Careem planning to expand. Ride-hailing company Careem, it was reported, plans to expand across as many as 30 new cities in Pakistan as it taps into the country’s growing middle-class.

The app, which competes against Uber Technologies Inc. offering car, motorcycle and rickshaw rides (with the occasional airplane) in South Asia’s second-largest economy, will seek to grow from its current presence in 10 Pakistani cities over the next three years, Junaid Iqbal, Careem’s managing director in the country, said in an interview.

Nonetheless, cellular phone penetration stands at around 71 percent in the country of more than 200 million people, according to Pakistan’s telecommunication authority. “The number of smartphones are growing, Internet users are growing,” Iqbal said. “In couple of years, you will have a huge population of people who will become very savvy.”

Careem and Uber have faced similar on and off problems in the recent past. In January 2017, hours after a memo stated ride-hailing services Uber and Careem were “illegal”, Chairman of the Punjab IT board Umar Saif said that the approach is being “reviewed”, which was ultimately dismissed.

Read more: Uber paid hackers $100,000 to hide security breach

“This is being reviewed within the government,” Saif told a publication in a telephone interview, when asked if the companies will be “banned” in Punjab. “We are coming up with a formal policy. This letter was an internal memo and has prematurely been made public.”

Ride-hailing company Careem, it was reported, plans to expand across as many as 30 new cities in Pakistan as it taps into the country’s growing middle-class.

Although he said both Uber and Careem currently do not pay tax in Pakistan, Saif said the Punjab government is tackling the issue with an “innovative business model”.

“There are two ways that a government can approach such companies when they launch: 1) treat them as a taxi service or 2) treat them as a service that governments can regulate.”

“We don’t want to treat them as a taxi service,” Saif added. “But they need to be regulated and taxed. They must register as a formal business under a new taxation regime.”

When asked to share details on the new plan, Saif said it will be modelled around taxation regimes for such companies in Malaysia, Egypt and Indonesia where they are treated as “network service providers”.

Despite earning revenue in millions, both Uber and Careem are using delaying tactics and causing hefty loss to provincial exchequer by evading tax, PRA informed.

A day after the Punjab government declared the services of mobile-application taxi service providers Careem, Uber and A-One as illegal, the Sindh government also sought legal action against these companies.

Read more: Suzuki launches automatic Cultus in Pakistan

The Sindh government declared that the use of private cars as taxis without the mandatory legal permits as “illegal” and had contacted PTA as it sought to block Careem’s mobile app. Secretary Transport said in a statement that he had written five letters to Careem management as a warning but had received no reply.

The provincial government had also initiated action against Uber to bring the app within ‘official compliance’. According to the Secretary Transport, private cars would need to be made commercial in order to be used as taxis.

Owners of the cars would be required to obtain fitness certificates for the cars. Route permits would be needed before the cars can be used as taxis, he added.

  • 29
    Shares

LEAVE A REPLY

Please enter your comment!
Please enter your name here