Turkish Finance Ministry chases Uber on tax evasion

In reply to allegations of unlicensed operations, the popular ridesharing service, Uber in a statement on Monday claimed that the company had paid its taxes and had the necessary documentations.

However, Turkey's Finance Ministry has moved against the corporation, on the grounds of tax evasion. But, when ministry inspectors paid a visit to the firm representing Uber in Turkey, only consultants were found to be working at the office, and they could not link any official addressees to Uber, therefore took initiative to find and fine 2,000 automobiles working with this company. The Finance Ministry is now in pursuit of Uber on the grounds of tax evasion, which was already under investigation by the Turkish General Directorate of Security for unlicensed commercial activity.

Addressees are nowhere to be found

The U.S.-based ridesharing service Uber, which has been operating in Turkey for a while, provides a vehicle calling service through smartphone applications. It was reported that if an Uber taxi driver carrying passengers was identified not to be the owner of the vehicle, a penalty would be issued. In addition, the vehicles would be impounded and the passengers would also pay a fine for using Uber vehicles. Uber noted in an earlier statement that they pay taxes and the company holds the necessary official documents.

Finance Ministry in pursuit

Following the footsteps of Twitter and Google, Uber, has acted as a broker for unlicensed taxi services, and recently came under the Finance Ministry's radar. As a result of some initiatives by the government, Google opened its office in Turkey while Twitter was also trying to solve the problem through its advertisers.

However, with Uber, the absence of an official address has forced the Finance Ministry to go after taxis and vehicles registered in the system.

According to ministry officials, Uber's problem was more critical than the others, because Turkey was now facing the same problem with the European Union, which previously slapped a billion-dollar penalty on Uber on the allegations of tax evasion.

How tax evasion took place

Even though the statement made on behalf of Uber suggested that "all necessary taxes have been paid," the truth was far from it.

First of all, the company does not have any headquarters or branches in Turkey. When the inspectors went to the company representing Uber in Turkey, the officials told them that they were only consultants. So, the ministry was unable to take any legal action against the company in Turkey, or the centers in the U.S. or Netherlands.

Why does the Finance Ministry have to take any action?

The way Uber works can mean potential losses in tax losses for Turkey, since its payments are made via credit cards registered in the system and directly get deposited through the company's system which is based in the U.S.

For instance, if one pays TL 100 via their credit card for an Uber taxi, the money goes directly into the company's bank account abroad. The organization charges a 5-7 percent commission thus Uber would transfer TL 93 to the taxi driver's account in Turkey and the remaining TL 7 would stay in Uber's pocket.

Consequently, the profit gained from some 2,000 member taxis amount for about TL 30 million. Turkish authorities face a double loss as they cannot collect either the value added tax (VAT) or the corporate tax from a company abroad.

The Turkish representative said they were not a branch of Uber and they only work as a consultant for the company in exchange for invoices and provide training to drivers using the system and did not hold any obligation on behalf of Uber.

Daily Sabah previously reported that the Turkish General Directorate of Security has been imposing fines on Uber, which brings together drivers and customers in a virtual environment, with the allegations of unlicensed driving. The story was picked up by the broadcast media and covered the views of both sides.

Under Turkish transportation laws, vehicles which are not registered as passenger transport vehicles, meaning they do not have a taxi license plate, but transport passengers by using a taximeter or similar applications, under the name of "touristic transport," are deemed as "unlicensed [pirate] taxi driving."