On Uber's Elaborate Tax Scheme

October 23, 2015

In May (of 2013), Uber formed a new business entity in the Netherlands called Uber International C.V. Over the next few weeks Kalanick’s San Francisco startup executed a flurry of transactions that shifted ownership of several foreign subsidiaries to Uber International C.V. and formed an agreement with the Dutch business to split the profits from Uber’s intellectual property. By mid-June, Uber was ready to continue with its dizzying rise, but with one critical difference: From that point on, nearly all its ride-share income outside the U.S. would be effectively shielded from U.S. taxes.

Uber is the consummate bad economic actor. The firm is begging to have its social license pulled in many, if not all, of the markets it currently operates in. They don't want to pay their fair share in taxes. They don't want to pay for proper benefits. They want to replace their "driver partners" with self-driving cars. (They call their employees "driver partners" to avoid calling them employees, as if they had a major equity position in the firm and they controlled several seats on the firm's board. (I don't think so.)

So far, the collective response to this has mainly been, "Meh." It's entirely possible that the firm might take its civic responsibilities more seriously, but they don't seem willing to do so on their own. I think we need to give them a wake-up call. Fortunately, that would be easy to do. You just have to stop using their services, and encourage others to do the same. It may cost you a little more for the service, and it might be slightly less convenient, but no one said civil society came cheap. And in the long run, we'll all be better off if we nip this sort of behavior in the bud now. Uber is welcome to stick around, but social licenses have to be earned and maintained. Let's take away their keys and give them some time to think about what they've done. A little on demand soul-searching might be just what's needed.