Uber has been accused of exploiting a VAT loophole that allows it to avoid paying £40 million in UK taxes every year, according to a Reuters investigation.
The investigation found that Uber exploits European and UK tax rules on business-to-business sales between EU countries.
The loophole enables the San Francisco taxi app company to pass on responsibility for VAT payments to its 40,000 UK drivers, who don’t earn enough to pay VAT.
UK drivers generate £560 a week in gross fares from the app and Uber takes a cut of 20-25% of that, suggesting that the company makes around £200 million a year in the country. But the taxi-hailing giant can keep all of that figure due to the loophole. Tech giants like Google and Facebook have exploited the same rule to avoid paying tax locally.
“[This is] yet another example of how large companies find loopholes and use the law for a purpose for which it was never intended,” Margaret Hodge, the former chairwoman of the Public Accounts Committee, reportedly said.
“There is a failure to pay tax that should be due. That reduces the money available for public services and is unfair on Uber’s competitors.”
A spokesperson for Uber shared the following statement with Business Insider:
“Uber respects the local tax regulations in each country in which we operate. Drivers who use our app provide transportation services to passengers and are therefore liable to pay VAT in relation to their activities, including the service fee they pay to Uber, if they meet the thresholds set by the government. This threshold varies from country to country and in the UK it is currently £85,000. The same rules apply to any international service provider with customers in the EU.”