While traditional taxis fully fulfill their tax obligations, incur many fees, fares need to be public and are subject to the management of local Departments of Transport; fare adjustment is difficult and takes time, but Uber and Grab do not have to bear many costs and management, so they are free to "set prices", making traditional taxis unable to compete.
- About promotional activities
The truth we see is that Grab reported hundreds of billions of dong in losses when operating in the Vietnamese market but still regularly has promotions, even free rides.
Unfair competition is stipulated in Clause 4, Article 3, Competition Law 2004: "Unfair competition is the competitive behavior of enterprises in the process of doing business that is contrary to common standards of business ethics, causing or possibly causing damage to the interests of the State, the rights and interests of the State, the legitimate rights and interests of other enterprises or consumers". The Commercial Law 2005, Article 100 also prohibits excessive promotional behavior or Decree 37/2006/ND-CP prohibits the use of promotional forms to dump goods and services.
However, Grab and Uber still carry out promotions, discounts, market takeovers, and unfair competition with the traditional transportation business sector. In the trial between Vinasun and Grab, there was evidence that Grab arbitrarily promoted continuously, promoting on top of promotion, while according to the law, all promotional programs must be registered in advance as prescribed. In addition, according to the regulations, a promotion period cannot last more than 45 days, nor more than 90 days in a year. Promotions also apply the same price to each product group and cannot exceed 50%.
Maybe you are interested!
-
Laws controlling the operation of technology taxis in Vietnam - 7 -
Current Status of Vietnamese Law on Controlling Abuse of Dominant Market Position in the Petroleum Business Sector -
Determining the price of residential land for compensation when the State recovers land according to current Vietnamese law - 2 -
Business registration under Vietnam Enterprise Law - Current situation and some recommendations - 1 -
Prohibition of discrimination in Vietnamese labor law - Current situation and some recommendations - 2
However, Grab has been applying promotions continuously and without reporting.
These promotions are applied to each trip, each group of customers for the same route, many promotions are even implemented over 50%, there are trips applying 100% promotion, meaning 0 VND trip, or shocking promotions such as flat price of 10,000 VND for all trips under 2km.
Specifically, the Certificate of Incorporation dated November 16, 2017 by the Binh Tan Bailiff recorded that 40 promotional programs of GrabTaxi were sent to customers from November 17, 2016 to December 15, 2016, which were not included in the 27 programs registered with the Department of Industry and Trade of Ho Chi Minh City. GrabTaxi's promotional behavior has seriously violated the Competition Law. Experts need to analyze and dissect carefully to be able to make judgments about the level of Grab's violation. We cannot eliminate Grab and Uber from the market, so we need to manage and bring them into the legal framework.
- About tax obligations
Decision No. 24/QD-BGTVT stipulates that companies providing science and technology application services must ensure full implementation of tax and financial obligations; the same is true for transportation business units. However, state agencies are very confused when collecting taxes from businesses in this new business model. While Uber cites the double taxation avoidance agreement between Vietnam and the Netherlands; Grab continuously reports losses. Just because of the unclear identification of business forms, the weak legal system that cannot manage taxes of foreign businesses, technology taxi companies such as Uber and Grab have taken advantage of legal loopholes to evade taxes. The inevitable consequence is that thousands of billions of VND in tax revenue are transferred abroad each year, a figure that makes many people startled.
The General Department of Taxation said that the amount of tax Grabtaxi paid in the 2014-2016 business period was 9.5 billion VND, equal to 1/30 of the amount of tax Vinasun paid in the same period.
(VND 1,200 billion). When detecting loopholes, state management agencies organized inspections, checks and tax collection from application providers and transport business partners. In Official Dispatch No. 15467/BTC-TCT dated November 15, 2017, the Ministry of Finance identified and listed Grabtaxi as having signs of high tax risk, forcing it to be included in the list of key tax controls. Hanoi Tax Department also issued Official Dispatch No. 78511 dated December 4, 2017, publicly disclosing the revenue of 197 transport cooperatives shared from Grabtaxi's services, requesting tax obligations for these partners. Ho Chi Minh City Tax Department, after the inspection, requested the collection of VND 67 billion in tax from Uber. Using administrative documents and chasing after tax arrears from businesses operating under the sharing economy model like Uber and Grab is not an encouraged solution and it does not solve the root of the problem.
The Grab and Uber models are joint ventures and revenue-sharing partnerships. Each person is responsible for paying taxes on their revenue, businesses pay corporate tax, and individuals pay personal income tax. In the tax management mechanism, the state and its entities proactively and voluntarily declare taxes, and the post-audit work is the responsibility of state management agencies. However, Uber and Grab deliberately evade taxes, and businesses or transport cooperatives that directly provide services also do not fulfill their tax obligations. State tax management also faces difficulties when the authorities do not fully grasp the number of kilometers, the number of vehicles, and the revenue of businesses, especially foreign businesses.
Operating in the same transportation business, with the same customer group, but the tax policies of the two types of businesses are different. According to economic expert Ngo Tri Long, the current inequality in taxes and fees for traditional taxis is due to the mechanism, not Uber or Grab [27]. Or at the dialogue conference on passenger transport business by taxi,
Regarding the application of electronic contracts, Mr. Ta Long Hy - Chairman of the Ho Chi Minh City Taxi Association frankly said that traditional taxi units could go bankrupt due to losses due to policies that do not keep up with reality, not necessarily due to the development of Uber and Grab. From here, we can see the importance of a mechanism and policy for tax management in particular and other business conditions in general in the economy to harmonize interests, ensuring fairness for businesses of both traditional and new models.
The cause of all the above shortcomings and limitations is that we do not have a policy, orientation and specific legal documents to regulate the new business model, the shortcomings and loopholes in temporary pilot legal documents such as Decision No. 24; from here, state management becomes weak, unable to keep up with new business entities. The only legal document in the six years of operation that mentions technology taxis and is the main management tool for this subject is Decision No. 24/QD-BGTVT. Here, technology taxi companies such as Uber and Grab only have an intermediary status, providing science and technology application services; subject to management according to the legal framework for e-commerce activities. Providing electronic software is just one of the operating methods that technology taxi companies use to implement transportation business. The legal provisions in Decision 24 have been distorted, causing users of ride-hailing software to be completely dependent on the management of application providers. Technology taxi companies take full advantage of their legal position as intermediaries providing software on digital platforms and from general, formal regulations that do not specify the nature of the business type, and do not clearly define the rights and obligations of companies providing science and technology applications.
2.2. Current laws controlling technology taxi operations
2.2.1. Background of Decree 10/2020/ND-CP
After four years of piloting technology taxis operating in five provinces and cities: Hanoi, Ho Chi Minh City, Da Nang, Khanh Hoa and Quang Ninh, it was not until early 2020 that we had Decree 10/2020/ND-CP replacing Decree 86/2014/ND-CP regulating the business of automobile transportation, especially regulations on technology taxis. The application of Decision No. 24/QD-BGTVT, Decree 86/2014/ND-CP to allow technology taxis to operate on a pilot scale; this can be considered a trial legal framework, from which the relationship between state management agencies and companies providing science and technology applications in the field of transportation business is developed in an open, proactive dialogue direction, creating conditions for the Ministry of Transport to manage, review and build a policy framework and monitor and implement effectively.
However, the test for technology taxi models like Uber and Grab is too long, four years with the same duration as the initial planned pilot period. After 11 times the draft was not approved by the Government, many conflicting opinions from all parties and from the people show that the rapid development of technology taxis has put managers and policy makers in a difficult position. The emergence of this new business model makes policy makers confused in identifying and managing these economic activities. This is a problem that most countries face, including developed countries.
The need to issue new legal documents to regulate technology taxi business models in the sharing economy that first appeared in our country is extremely urgent. Most recently, on August 12, 2019, Prime Minister Nguyen Xuan Phuc signed Decision No. 999/QD-TTg approving the project to promote
promote the sharing economic model with the goal of ensuring an equal business environment between businesses operating under the sharing economic model and the traditional model. This move demonstrates the change and awareness in the Government's actions in recognizing new business forms based on the exploitation of surplus human resources and resources in society, in order to optimize resources as well as economic activities based on advances in science and technology, especially the development of the 4.0 industrial revolution. The decision also emphasizes that state management needs to ensure that legal economic activities are developed, including sharing economic activities, changing the mindset and methods of state management to suit the development trend of the digital economy and the fourth industrial revolution; at the same time, raising awareness and capacity of businesses, localities and people about the sharing economic model.
Decree 10/2020/ND-CP was issued to relieve the thirst for policy infrastructure for technology taxis and carries the mission of providing a common and complete legal framework to manage all types of transportation businesses in general and technology taxis in particular; creating an equal and transparent business environment, aiming at the highest goal of meeting the increasingly better demands of the people and maintaining traffic order and safety.
Decree 10/2020/ND-CP has classified the vehicle dispatching business activities of companies providing science and technology applications operating in the field of transportation business. Whether companies providing science and technology applications such as Uber and Grab are doing technology business or transportation business is a difficult question, the answer may even be both, the answer depends on each country, each legal system. But we learn from the management experience of other countries, summarize domestic practices, then we need to have an answer for Vietnamese law. Only after defining
Once the new technology taxi is recognized, it can take the next steps to build a legal corridor and policy mechanisms to facilitate innovation and business in the new sharing economy.
The new decree is also the end of the war between traditional taxis and technology taxis. Since the pilot implementation was allowed, technology taxi companies have dominated the market share of passenger transport in big cities such as Hanoi, Ho Chi Minh City, and Da Nang, creating enormous competitive pressure on traditional transport businesses, many of which have even gone bankrupt and suffered losses. The cause of this problem is the lack of policies to ensure fair competition between the traditional sector and the new sharing economy sector. The climax and also a typical example of this war is the case of Vinasun suing Grab. The lawsuit lasted three years (2017-2019), even right after the first instance verdict, both companies filed an appeal and immediately after that, the High People's Procuracy issued a decision to appeal the appeal in which the first instance verdict was amended, not accepting all of Viansun's lawsuit requests and Grab did not have to pay compensation outside the contract due to lack of legal basis [30]. The inconsistency of the trial panel and the control panel throughout the trial shows the limited capacity of the judiciary and especially the huge legal gap that needs to be filled in the field of transport business. After the trial ended, both the representatives of the Procuracy and the trial panel unanimously proposed that the Supreme Procuracy and the Supreme People's Court recommend the Ministry of Transport and relevant agencies to rebuild the legal framework for the management of transport business types to ensure a fair business environment [38].
Decree 10/2020 meets the urgent need to regulate business conditions and financial responsibilities of technology taxi companies such as Uber and Grab. Before the new decree, in the pilot model, the business model
Technology taxi business is not included in the list of business lines, so Uber and Grab have difficulty registering to establish a business, most companies providing car booking applications are registered in other service industries. Business conditions for technology taxi - a type of vehicle operating under electronic contracts in Decision 24/QD-BGTVT are always assessed as simple and loose in terms of business conditions compared to traditional types. The problem of how to react, manage, and tax requires inter-ministerial and inter-sectoral consensus; these things could not be done when Decision 24 was temporary and still had many shortcomings and was unclear about technology taxis. Technology taxi companies will be officially recognized, not losing business and development opportunities in Vietnam just because of lack of legal infrastructure. From now on, traditional businesses do not need to compare the difference in business conditions with technology taxis anymore.
Financial responsibility of technology taxis has always been a factor that caused a lot of frustration during the pilot implementation period. Due to the lack or incompleteness of mechanisms and policies for tax management, vehicle management and electronic transactions, we cannot monitor the implementation of tax obligations of units providing software applying science and technology in the field of transportation business, especially with foreign enterprises, all money is transferred out of Vietnam to evade taxes. After determining the legal nature, controlling the transactions of technology taxi companies in Decree 10/2020/ND-CP promises to create equality between types of transportation business in the market.
Not only the tax authorities, but also ministries such as the Ministry of Transport, the Ministry of Industry and Trade, the Ministry of Public Security, and the Ministry of Information and Communications have all experienced six years of difficulties in managing technology taxis. For example, they have not been able to identify or punish technology taxis that violate regulations, and have not issued