Uber drivers in Russia are quitting over new tax regime
Uber drivers in Russia are quitting after the introduction of new tax legislation. An 18% value-added tax (VAT) on electronic goods and services provided by global internet giants was signed into law in July. Apple, Google, Microsoft and Netflix are registered with the country's tax service, but Uber has passed the tax on to drivers. The ride-hailing service makes drivers pay VAT on top of its service fee, saying it will later reimburse them. The change in rules has led to some drivers quitting Uber, increasing its battle with Russian market leader Yandex.Taxi.

Russian President Vladimir Putin's tax on U.S. tech companies isn't going over well with Uber drivers.

Russian President Vladimir Putin's tax on U.S. tech companies isn't going over well with Uber drivers. Credit: sean gallup/Getty Images

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Uber Technologies Inc. has asked its Russian drivers to temporarily bear the load of a new tax charge, causing some of them quit to avoid paperwork and tax filings.

President Vladimir Putin signed a law in July to levy an 18 percent value-added tax on electronic goods and services provided by global internet giants starting in 2017. Apple Inc., Alphabet Inc.’s Google, Microsoft Corp. and Netflix Inc. are registered with Russia’s tax service, according to Vedomosti daily.

Uber has passed these duties on its drivers, requiring them to pay the VAT on the company’s service fee. Uber will later reimburse them these payments, it said in an e-mailed response to questions. The company will refrain from raising prices for passengers, it added.

The move has caused some drivers to quit Uber said Stanislav Shvagerus, head of lobby group Taxi 2018. Losing drivers is bad news for Uber, which has struggled to catch Yandex.Taxi, the market leader.

“Most drivers only pay a unified annual tax linked to turnover,” Shvagerus said. “Why should they start paying VAT and become tax agents for a multinational firm? This requires weekly paperwork and also makes them subject to tax audit.”

Vasily Salnikov, a 29-year old taxi driver in Novosibirsk, said he terminated his agreement with Uber after the company notified him in late December that he would need to pay the tax. “I stay connected to Yandex.Taxi and Gett, which don’t have such ridiculous requirements,” he said.

Uber denies that a significant number of drivers are quitting the company. “We continue collaboration with our partners and are strongly focused on providing support and answers to their possible questions,” the company said by e-mail.

Uber doesn’t reveal up-to-date figures on how many drivers it has in Russia. In 2015 the online-taxi company had an estimated 3,000 cars in Moscow, compared with more than 15,000 connected to Yandex.Taxi’s online hailing application, according to the Moscow Chamber of Commerce. Yandex.Taxi is owned by Russian search engine Yandex NV.