According to documents leaked to The Guardian and the journalist organization ICIJ, the ride-hailing company Uber used tax havens to avoid tens of millions in taxes.
A new information leak reveals the arrangements made by ride-hailing company Uber to avoid taxes.
– Our company’s tax arrangements are – expressed in European political terms – the company’s Achilles heel, the company’s main lobbyist Mark McGann wrote at the end of 2015 in his email to the head of Uber’s tax department.
Uber used various tax havens in its tax arrangements. According to emails leaked to The Guardian and the international journalists’ organization ICIJ, the company’s goal was to direct the authorities’ interest to the taxation of its drivers instead of the taxes paid by Uber. According to the leak, Uber avoided millions in taxes as it expanded around the world by routing profits through Bermuda and other tax havens.
Legislation in different countries had fallen behind companies like Uber doing digital business. Uber’s app is currently being used the company’s own announcement (you switch to another service) including 93 million people. There are 3–5 million freelance drivers around the world.
Developed a digital tax return in Estonia
The documents obtained by ICIJ are from the years 2013–17, when Uber grew strongly.
According to the documents, Uber managers advised regional managers in their e-mails how to avoid possible tax consequences in advance, which Uber’s operating model in different countries would inevitably cause.
The company emphasized wherever it did business that drivers must pay their taxes according to regulations. For example, in Estonia, Uber was involved in developing a new type of digital tax declaration that its drivers use.
Based on the leaked documents, shifting the authorities’ attention to employee taxation was a strategic choice.
In Nigeria, Uber’s local manager believed after meeting with local authorities that they would shift the focus from investigating the company to ensuring drivers are accountable, including paying taxes.
Royalties and profits through Bermuda
At the same time, Uber tried various means to reduce its own corporate taxation.
It established a subsidiary in Bermuda, known as a tax haven, and transferred its technology patent to its ownership. This is how global royalties from using Uber’s apps were paid to the non-existent island nation of taxation.
Uber’s director of communications warned the company’s top management that using the tax services of Bermuda and the Cayman Islands would stir up bad blood in Europe. However, they were used until 2019, when Uber was listed on the New York Stock Exchange. At that time, CICTAR, a research institute specializing in the study of tax evasion, estimated that Uber had avoided taxes for hundreds of millions of euros worldwide.
– As a company, Uber undertakes to comply with tax laws and regulations wherever it operates and to help its partners and drivers comply with the requirements of the law and taxation, Uber’s spokesperson Jill Hazelbaker says in a written response to ICIJ’s questions.
Uber started in Europe in 2012 in France. Shortly after that, it founded a subsidiary in the Netherlands, Uber BV, through which it runs the entire company’s financial transactions. Uber BV pays drivers all over the world a maximum of 80 percent of the amount they charge their customers.
According to an investigation by The Guardian and ICIJ, Uber BV transfers the rest of its income to Bermuda, where it is tax-free.
The company avoided additional taxes – the drivers did not survive
The Dutch arrangement soon attracted the interest of the authorities of other European countries. In 2015, the tax authorities of France, Germany, Sweden, Great Britain and Belgium demanded information about the company and its employees from Uber BV.
According to the documents, the investigation worried Uber’s management, which had a lively correspondence with the Dutch authorities. The five-country investigation did not lead to action against Uber. European tax authorities interpreted that Uber did not have to pay VAT on its service.
Instead, drivers have been penalized for this and other degrees launched from Uber.
In Denmark, the taxman considered in 2018 that the country’s approximately 1,200 Uber drivers must pay more tax for their work. The Danish tax authority reached its interpretation after analyzing Uber BV’s data.
A huge loan in the Netherlands
In India, too, Uber got into several ongoing legal battles. The country’s Ministry of Finance ordered the company to pay 2015 extra tax on all its rides. Uber has appealed to various Indian courts.
When listing on the New York Stock Exchange, Uber transferred the technology patents and copyrights held in Bermuda to the ownership of the Dutch unit.
The move has given rise to new legal disputes. In order to transfer the copyrights, Uber took a loan of 16 billion dollars, or just under 15.8 billion euros, from the company’s Singapore unit.
According to tax experts, the loan repayment arrangements will reduce the tax paid by the company in the Netherlands by almost one billion euros per year for two decades.