Uber Drivers in Taiwan Threatened with Fines of $780,000 in Draft Rules

By Debra Mao | December 6, 2016

Investors and companies are getting a preview of how the Taiwan government’s plan to become “Asia’s Silicon Valley” might fare.

Uber Technologies Inc., one of Silicon Valley’s most disruptive companies and valued at more than $60 billion, launched services in Taiwan in 2013. The app has been downloaded by more than a million people in four cities and its drivers number in the tens of thousands.

Just as in New York and other cities, it encountered fierce opposition from local taxi operators, who see the San Francisco-based company as a threat. Now, three Taiwanese lawmakers want those caught driving for Uber fined as much as NT$25 million ($780,000), more in line with local antitrust fines, and their licenses suspended. A key legislative hearing on the draft rules will be held on Wednesday in Taipei.

“The amount left me stunned,” one Uber driver, who gave his surname as Yang, said Tuesday during a press conference in Taipei organized by the ride-sharing company. “Did we commit murder or arson? Even drunk drivers are fined only NT$90,000.”

Such large fines would be unprecedented for Uber, said Likai Gu, its general manager for the island. Even in Macau, where it nearly withdrew this year, the company paid just $1.25 million to resolve penalties against about 300 drivers, the South China Morning Post reported in September. A court in France ordered a one-time fine of 850,000 euros ($915,000) in June.

“We’re surprised that a place like Taiwan, which values transparency and democracy, would have these issues,” Damian Kassabgi, Uber’s Singapore-based director of public policy in the Asia-Pacific region, said in an interview. Communist China claims the island democracy, separately governed since 1949 with a population of 23.5 million, as part of its territory.

Structural Challenges

While mainland China formally allowed ride-hailing services in November, the legal framework for its services is less clear in other Asian countries such as Japan, South Korea and Thailand.

In Taiwan, where new President Tsai Ing-wen faces structural economic challenges and the prospect of slowing global trade, fostering innovation and attracting startups are a key cornerstone in her economic policy.

Tsai encouraged financial firms to direct funding toward venture capital and pledged to loosen strict equity-ownership rules in its company laws. The National Development Council this year established a NT$100 billion fund that will invest in businesses seeking to acquire new technologies and in innovative new companies.

The state-funded Industrial Technology Research Institute, which spawned the likes of Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, is working to develop intelligent self-driving cars in collaboration with U.S.-based companies like Nvidia Corp.

Back Taxes

Uber, though, hasn’t benefited from the president’s apparent goodwill. Taiwan’s Finance Ministry is pursuing the company for NT$135 million in back taxes and penalties, the Economic Daily News reported, while its Ministry of Transportation and Communications said it would ask Apple Inc. and Google to remove the app from its online stores.

While the company agreed to comply with requirements on regulation, insurance and taxation and a future diversified-taxi plan, Uber has yet to produce a concrete plan and continues to operate illegally, the transport ministry said Nov. 15.

“To avoid disputes with which the government cannot assist, situations where no compensation is available, companies and consumers should choose regulated and legal transport providers to protect their rights,” it said in a statement.

Regulatory Stalemate

Ruling party lawmakers Ker Chien-ming, Wu Ping-jui, and Liu Shyh-fang wrote in their draft legislation that Uber infringed the rights of more than 80,000 taxi drivers and breached rules governing highways, competition and foreign investors. After this week’s committee review, successive readings in the legislature could be completed within the month and the law passed, according to Ker’s legislative office.

While Uber says it doesn’t want to leave Taiwan, it also won’t submit to being regulated like a traditional taxi company. It’s calling on Tsai to break the stalemate so that it can fit its square peg into a round regulatory hole.

“We’ve seen clarifications on existing laws, exemptions, and even full legislation introduced,” in other parts of the world, Kassabgi said. “To make us fit in under the current rules is like having a librarian regulate Amazon.”

Not every new entrant to the Taiwan market will face as tough of a reception, according to Jamie Lin, founder of startup accelerator AppWorks Ventures in Taipei, especially if there are no entrenched incumbents like the taxi industry. The saga shows Taiwan isn’t ready for Uber, Lin said.

“All over the world ride hailing technologies are booming,” Lin said. “My only concern is that Taiwan will be late to the game.”

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