Taxman, Grab at odds over new tax regime

Grab said in a statement late on Wednesday that it was "disappointed" a meeting with representatives of the General Department of Taxation did not result in a positive outcome.

It contended that the recent change to make the 10-percent tax payable on the entire fare rather than only its share of the fare means drivers’ share of the tax has increased from 3 percent earlier to 10 percent.

It means tax authorities consider drivers its employees while it has always viewed them as partners who have to pay their own tax, the company said.

"We are disappointed that the General Department of Taxation wants to increase the tax on partner drivers’ revenues from 3 percent to 10 percent though it is aware that drivers do not get a deduction in value-added tax."

The fact that it now has to bear the responsibility of paying tax on its driver partners’ incomes is not in line with VAT laws, it said.

The General Department of Taxation has not been consistent in identifying who should pay VAT, it said.

Grab said it increased fares by 5-6 percent after the tax regime was changed to reduce the loss in drivers’ incomes.

But tax authorities dismissed this claim.

Ta Thi Phuong Lan, deputy head of the department of tax administration for small and medium enterprises and individuals, said 10 percent VAT is imposed on every transport company and paid by passengers, not the companies, and Grab hiked fares because it does not want its income to drop.

VnExpress’s calculations show that with the new fares and tax, Grab’s revenues increase by 6.1 percent from each trip while drivers’ incomes drop 4.5 percent.

Customers have to pay 5 percent more fare while the government’s tax revenues jump by 3.8 times.

In Hanoi and Ho Chi Minh City this week hundreds of GrabBike drivers turned off their app and drove around in large groups to protest the company’s recent 7-percent hike in commission rate, which it claims was because of the new tax.

Grab, the biggest ride-hailing firm in Vietnam, had over 200,000 drivers as of last year, according to a report by the Ministry of Planning and Investment.