Ride hailing companies are gaining popularity in Pakistan as they provide a cheap and affordable means of transportation to the people of Pakistan. Companies like Uber and Careem are currently operating as local ride hailing services under whose partnership program, people are using personal cars as commercial vehicles to earn money.
Since none of these cars are licensed to be used commercially, Punjab government has decided to improve regulations on these companies and bring them within the net tax bracket after the last time these companies were temporarily banned from operating in the capital.
The main issue that the government has had with these ride hailing companies is because private vehicles are used as commercial vehicles. And if such vehicles are used as commercial vehicles, then they need to be regulated like other commercial vehicles are regulated and should be included in the tax bracket as well.
Chairman of Punjab Information Technology Board (PITB), Umar Saif said that the use of private vehicles as commercial vehicles has an impact on the resale value of the latter. Thus, they are thinking of coming up with a clause through which such vehicles need to be re-registered as private vehicles before they are being sold in the market.
A clause will be added by Punjab government in the motor vehicle ordinance for the ride hailing companies. PITB is now looking after the regulatory changes for the ride companies as there are a lot of complexities in the business models of such companies which makes it difficult to regularize them.
While regulations are being introduced, Punjab government is also looking to take measures to include these companies in the tax bracket. Currently, there are no laws under which which these companies are being taxed, but now commercial taxes will be applied on these vehicles when the drivers sign up on the app. Sales tax from the rides will be sent to Punjab Revenue Authority (PRA) while income tax will be sent to FBR.
The business model of these ride hailing companies has made it difficult for the government to introduce tax reforms and regulations. Private car owners use their vehicles to provide ride service using the platforms like Uber and Careem. Hence, none of these ride hailing companies has their own car in the fleet.
Earlier this year in June, a ban was imposed on ride hailing companies Uber and Careem because they did not have commercial licenses and were declared as illegal by the Punjab Transport Authority. The vehicles operating under these companies did not get any fitness certificates from the government as well. The ban was lifted by the government shortly as soon as the companies obliged to operate in a legal framework that will be devised by the provincial governments and are willing to adopt the current proposal.
Currently, Uber is going through a turmoil worldwide as its CEO Travis Kalanick had to go on leave for indefinite period following a series of continuous scandals in the company. Careem, on the other hand, just closed its $500 million E-funding series that took the company’s valuation to more than $1 billion.