No Picture

Victorian Government’s Unfair Treatment of Taxi Industry

November 8, 2017 Calvin Collaery 0

The Australian taxi industry and the drivers, in particular, are a harried lot today, although the government did announce some measures of relief about a year ago. On a closer analysis, the steep drop in license prices appears to be at the root of the problem. Until the ride-share services such as Uber arrived on the scene, everything was Humpty dory and no one apparently had any grouses, except perhaps the customers, who had fewer options. But, once the ride-share companies quickly started growing in popularity, the taxi industry was suddenly faced with a threat of extinction.

Taxi licenses

Uber vs taxi picture In the past, taxi licenses were a valuable investment and priced possession. Year after year these licenses commanded decent premiums and ranked as any other investment with assured appreciation, or nearly assured appreciation. But, the ground realities suddenly changed and everything crashed similar to what happened to global stock markets in 2008/2009. The taxi industry now expects the Victorian government to extricate all stakeholders from this catch 22 situation. The government has responded to the situation by announcing compensation to the license holders and also set up a hardship relief fund. Alongside these measures, the government also decided to deregulate the taxi industry apart from replacing the current licensing regime with a single registration scheme for every service provider. While part of these measures has gone well with the taxi license holders and drivers, de-regulation of the industry and changes to the licensing regime remain conflict points.

On the other side, citizens fear that the government is setting a bad example by compensating taxi drivers and license holders. This fear stems from the fact that there can be scores of other sectors or industries that suffer a loss of business and therefore struggle to make a profit due to reasons entirely beyond their control. The question being raised by these quarters is whether the government will step in with similar largesse to address every such situation, present and future. But, in practice, most people opine that at the end of the day, the taxi industry may be the singular recipient of relief from the government funded in part or wholly by the taxpayer. In August 2016, the government had proposed to levy $2 for every trip made by all the service providers. Nearly a year later, this was slashed by 50% making the levy just $1 per trip.

Others, however, see the government justified since the taxi licenses and plates did earn revenue for the government in the past and the government thus profited from the industry. As for the man on the street, anyone who had tried to hire a taxi in Melbourne or Sydney some 2 years ago can hardly forget the poorly maintained and notoriously dirty cars that were available. Today, with the introduction of ride-share services, the customer is experiencing a paradigm shift and no sensible government would deprive him of the privilege in order to protect a relatively smaller group of people. The government, on the other hand, has its political compulsions to strike a compromise with the traditional taxi industry than focus on the welfare of the customers. Yet, the present measures should be reckoned as a great move since it is an acknowledgement of the changes induced by technology.

Assets melting away

tense man sitting on chair Decades ago, when taxi licenses were issued to Australians, the government held out a promise that investments made into the license at that time would work like retirement funds since there would be perpetual appreciation in license values and that the licenses constituted a tradable asset similar to any other fixed asset. The Government was not lying and there are many Australians who have indeed made a neat profit from these licenses. But only when the ride-sharing companies arrived, the intrinsic value of the taxi licenses started melting away, more like your favourite ice-cream under a fan turning into a bowl of liquid. Many of the license holders who expected the ride-sharing companies to be a storm in the tea-cup have learned the hard way that these technology-driven companies are there to stay.

Mr Ashish Rekhi, the owner and operator of Melbourne’s one of the prominent Taxi companies, Taxi Maxi, says ”Not long ago, these very licenses were valuable, and even banks treated them as valuable collaterals to lend money. Today, these very same licenses are threatening to become a huge liability. After all, like anyone else in the taxi industry, I had invested my hard earned money into a government-backed asset, at least technically and financial pundits would call it a gilt-edged security.“
For someone who was sitting on an asset worth, say $500,000 the night before, to find that he has lost as much as $250,000 when he was sleeping can be fraught with alarming consequences. The pain gets accentuated because the individual did nothing wrong to deserve the financial tsunami.

In retrospect

animated checklist yes, no and maybe Decades ago, when the government saw taxi licensing as an opportunity to regulate the business and earn some revenue in the process, but in retrospect failed to create an exit route if and when the tide turns. Today, that milch cow has turned into the Achilles heel for the government. On one side, the Victorian government may want to save the taxi industry from extinction but would be compelled to answer the taxpayer on how the doles are funded. At the end, if the taxi industry is appeased, a battery of other loss-making industries might expect a similar treatment from the government. Given the global movement against fossil fuels, the Australian coal industry could soon be knocking at the doors of the government drawing a parallel with the taxi industry and that could leave the government gasping for breath. Meantime, the taxi industry will continue with its protests, shouts and other forms of expressing resentment.

Another lesson perhaps, that monopolies, cannot survive without the protective cover.